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TMI Blog2016 (2) TMI 893X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the provisions of Sec.14A do not apply to the appellant's case, when the net owned funds are more than the value of investments. 2. On the above and other grounds that may arise during the appeal, the appellant requests for order of deletion of the addition made". 3. The only issue in this appeal is as to whether the disallowance made under the provisions contemplated u/s. 14A of the Act is applicable or not in the circumstances of the case? 4. The brief facts of the case are that the assessee is a company and is engaged in the business of manufacturing and selling of veterinary vaccines & medicines. The assessee filed its return of income admitting a Gross Total income of Rs. 35,14,791/- on 30-09-2009. 5. During the assessment proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the case of HDFC Bank Limited Vs. Dy.CIT by the Hon'ble High Court. 8. The Ld. DR relied on the order of the ITAT 'D' Bench, Mumbai in the case of HDFC Bank Limited Vs. DCIT dt. 23-09-2015 which consider the whole gamut of judgments to support the order of the CIT. 9. We have considered the rival contentions and perused the material on record. Even though assessee submitted before Ld. CIT(A) that it acquired shares for trading, no such income was disclosed nor assessee supported by statement of accounts before us that the shares are 'stock in trade'. As far as invoking the provisions of Section 14A are concerned, we have seen from the order of the AO, assessee was specifically asked to explain about the expenditure incurred for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating to income which does not form part of the total income. Second part under sub-rule 8D(2)((ii) deals with disallowance to be computed on the basis of formula given therein in a case where the assessee incurs expenditure by way of interest which is not directly attributable to any particular income or receipt. The third part as provided under Sub-Rule 8D(2)(iii) is an artificial figure i.e. one-half per cent of the average investment, income from which does not or shall not form part of the total income, as appearing in the balance sheet of the assessee on the first day and the last day of the previous year. Aggregate of these three components would constitute expenditure in relation to exempt income and would be disallowed u/s 14A of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) accrues or arises or is deemed to accrue or arise to him in India during such year ; or (c) accrues or arises57 to him outside India during such year : Provided that, in the case of a person not ordinarily resident in India within the meaning of sub-section (6)* of section 6, the income which accrues or arises to him outside India shall not be so included unless it is derived from a business controlled in or a profession set up in India. (2) Subject to the provisions of this Act, the total income of any previous year of a person who is a non-resident includes all income from whatever source derived which- (a) is received or is deemed to be received in India in such year by or on behalf of such person ; or (b) accrues or arise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n accrual basis and which does not form part of total income of a particular assessment year can be disallowed under clause (i) of Rule 8D(2). Rule 8D(2)(i) does not refer to the investment made by the assessee. On a conjoint reading of clause (i) and clause (iii) of Rule 8D(2), the difference between them is clearly discernible. While clause (i) speaks of disallowance of expenditure directly relating to income which does not form part of total income, clause (iii) provides for disallowance of expenditure of the average value of investment, income from which does not or shall not form part of the total income, as appearing in the balance sheet of the assessee on first day and last day of the previous year. Therefore, while disallowance of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re relating to investment which has not yielded any exempt income during the previous year relevant to the assessment year under dispute. Therefore, we direct the AO to disallow the expenditure relating to investments resulting in income earned/accrued which does not form part of total income of the impugned assessment year. However, so far as AO's computation of expenditure to be disallowed under rule 8D(2)(iii), the same in our view, is in conformity with Rule 8D(2)(iii), hence, do not call for any interference". 10. In view of the above, since assessee has investments and shares which are yielding exempt incomes, we have no option than to confirm the amount under Rule 8D(2)(iii). Accordingly, the order of CIT(A) does not call for any in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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