TMI Blog2019 (6) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 38,900. This view of ours is as per the ratio laid down in Cheminvest Ltd. [ 2015 (9) TMI 238 - DELHI HIGH COURT] and Vireet Investment Pvt. Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] We direct the AO to restrict the disallowance u/s 14A the amount already disallowed by the assessee. The grounds are allowed. Disallowance of interest expenditure u/s 36(1)(iii) - as assessee has diverted interest bearing funds for non business purpose by investing in jewellery and shares, the Assessing Officer disallowed interest expenditure u/s 36(1)(iii) - HELD THAT:- From the facts and material available on record, it is evident that the assessee had surplus fund of ₹ 92.30 crore available with it. Therefore, the presumption would be, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the course of assessment proceedings, the Assessing Officer on verifying the materials on record, noticed that the assessee had invested ₹ 66,07,87,447, in non current investment and earned dividend income of ₹ 38,900, which was claimed as exempt. Whereas, the assessee has made a disallowance of ₹ 6,165, towards expenditure attributable to earning of exempt income. Therefore, the Assessing Officer called upon the assessee to justify that the disallowance made by it is in accordance with Rule 8D. Though the assessee submitted its explanation stating that the voluntary disallowance made by it is the amount which could be disallowed under section 14A of the Act, however, the Assessing Officer did not find merit in the submiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecisions: i) CIT v/s HDFC Bank Ltd., [2014] 366 ITR 505 (Bom.); ii) HDFC Bank Ltd. v/s DCIT, [2016] 383 ITR 529 (Bom.); and iii) CIT v/s SBI DHFL Ltd., [2015] 376 ITR 296 (Bom.). 6. As regards disallowance of administrative expenditure under Rule 8D(2)(iii), the learned Authorised Representative submitted, only those investments yielding exempt income during the year can be included in the average value of investment for computing disallowance under Rule 8D(2)(iii). He submitted, the investment on which the assessee has earned dividend income of ₹ 38,900, during the year amounted to ₹ 5,39,000, only. Therefore, disallowance under Rule 8D(2)(iii) has to be compute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the investment in shares, mutual funds, etc. That being the case, no disallowance of interest expenditure under Rule 8D(2)(ii) could have been made. As regards the disallowance of administrative expenditure, under Rule 8D(2)((iii), it is the contention of the assessee from the assessment stage itself that the investment on which the assessee had earned dividend income of ₹ 38,900, is ₹ 5,39,000. The aforesaid fact has not been controverted by the Departmental Authorities. Now it is well settled that while computing disallowance under rule 8D(2)(iii), the Assessing Officer can consider only those investments which have yielded dividend income during the year under consideration. Therefore, the disallowance of expenditure under r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer disallowed interest expenditure of ₹ 12,03,782, under section 36(1)(iii) of the Act. Though, the assessee challenged the aforesaid disallowance before learned Commissioner (Appeals), however, he sustained the disallowance made by the Assessing Officer. 13. The learned Authorised Representative submitted, since the assessee had sufficient interest free funds available with it, presumption would be that the investments made in jewellery and shares were out of such funds. Therefore, no disallowance under section 36(1)(iii) could be made. In support of such contention, he relied upon the decision of the Hon'ble Jurisdictional High Court in CIT v/s Reliance Utility and Power Ltd., [2005] 313 ITR 340 (Bom. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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