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2019 (3) TMI 699 - AT - Income TaxDisallowance u/s.14A read with Rule 8D - contention of assessee that AO has recorded no proper satisfaction - HELD THAT:- No force in this contention because the AO has categorically recorded that : the “assessee has incurred various kinds of expenses in its Profit and loss account. The investments have been made in various schemes of mutual funds. It is not possible that the assessee has not incurred any expenditure in connection with such investments and earnings of such dividend income. As this investment is substantial assessee has used its resources to monitor and oversee the progress of such schemes of mutual funds. Therefore it cannot be said that no expenditure is attributable to such activities”. In view of the above extracted portion of the assessment order, it is clearly discernible that the AO recorded proper satisfaction before making disallowance u/s.14A. Computing of disallowance - whether investments which did not yield any tax free income during the year should have been excluded while computing the disallowance? - HELD THAT:- The Hon'ble Delhi High Court in ACB India Ltd. vs. CIT (2015 (4) TMI 224 - DELHI HIGH COURT] has held that the average value of investments, for the purposes of Rule 8D(2)(iii), should be confined to those securities in respect of which exempt income is earned and not the total investments. Similar view has been taken in the case of ACIT vs. Vireet Investments (P) Ltd. [2017 (6) TMI 1124 - ITAT DELHI] holding that only those investments should be considered for computing average value of investments which yield exempt income during the year - we set aside the impugned order to this extent and remit the matter to the file of Assessing Officer for re-computing the disallowance under Rule 8D(2)(iii) - Assessee appeal is partly allowed for statistical purposes.
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