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2017 (12) TMI 47 - AT - Income TaxDisallowance u/s 14A - Held that:- The assessee has invested its own interest free funds for making investments. There is no infirmity in the appellate order of learned CIT(A) deleting the addition u/r 8D(2)(ii) r.w.s. 14A, keeping in view factual matrix of the case as firstly the funds were borrowed from bank by the assessee for export credit limits on which interest was paid and hence interest on borrowings have direct nexus with export credit facilities granted by the bank, secondly own interest free funds available with the assessee are much higher than investments and hence presumption will apply. The Revenue fails on this ground. We order accordingly. Disallowance of administrative and other expenses u/r 8D(2)(iii) r.w.s. 14A - Held that:- We find merit in the contention of the assessee but the claim raised by the assessee need verification and the matter is restored to the file of the AO to verify the HO expenses incurred which are to be taken cognisance for making disallowance u/r 8D(2)(iii). The AO shall also verify the contention of the assessee that only HO is involved in making investments and other divisions/factories have no role to play in making, controlling, managing and/or monitoring investments. The onus is on the assessee to prove its contentions to get relief. We order accordingly. Only those investments should be considered for inclusion for computing average investments for computing disallowance u/s 14A r.w.r. 8D(2)(iii) which have actually yielded exempt income during year under consideration - Held that:- We direct the AO to decide this issue in the light of decision of Special Bench in the case of Vireet Investment Private Limited (2017 (6) TMI 1124 - ITAT DELHI) wherein only those instruments/securities which yielded exempt income during the previous year relevant to the impugned assessment year shall be considered for computing disallowance u/s 14A r.w.r. 8D. The Special Bench in para 11.16 held that only those investments are to be considered for computing average value of investment which yielded exempt income during the year. We are bound by decision of Special Bench and Respectfully following the same, we direct the AO to compute disallowance u/s 14A r.w.r. 8D(2)(iii) in accordance with the ratio of law laid down by Special Bench – ITAT, Delhi in the case of Vireet Investment Private Limited(supra). We order accordingly. Whether the disallowance u/s 14A can fall below disallowance suo motu voluntarily made by the assessee in the return of income filed with the Revenue? - Held that:- The mandate of the 1961 Act is to tax real income and not an income which was never the income chargeable to tax in the hands of the assesseee but was declared under a wrong belief or notion . The mandate of the 1961 Act is to tax real income and tax can only be levied under the authority of law. Thus, if after verifications and following the ratio of law decided by the tribunal in the instant case, if the disallowance falls below the disallowance u/s 14A offered by the assessee in return of income, be it may the Revenue cannot charge tax on income which never was the income of the assessee chargeable to tax within the mandate and provisions of the 1961 Act as the tax can only be levied by the authority of law.
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