TMI Blog2021 (3) TMI 653X X X X Extracts X X X X X X X X Extracts X X X X ..... ed any exempt income during the year in question, as directed by the CIT(A), subject to an upper limit as that of the exempt dividend income that was earned by the assessee during the year in question. Disallowance computed under Sec. 14A r.w Rule 8D to be added to the book profit under Sec. 115JB - HELD THAT:- As observed by the CIT(A), the Special bench of the ITAT Dehli in the case of ACIT Anr. Vs. Vireet Investments Pvt. Limited Anr [ 2017 (6) TMI 1124 - ITAT DELHI ] had clearly observed that for the purpose of computing the average value of investments within the meaning of Rule 8D(2)(iii) the investments which had not yielded any exempt income during the year are liable to be excluded. Also, the Special bench of the Tribunal had observed, that computation under clause (f) of Explanation 1 to Sec.115JB(2) is to be made without resorting to the computation contemplated under Sec. 14A r.w Rule 8D of the Income Tax Rules,1962. Accordingly, finding no infirmity in the view taken by the CIT(A) w.r.t the aforesaid two issues on the basis of which his order has been assailed by the revenue before us, we, thus uphold the same. - ITA No.1054/MUM/2019, 1393/MUM/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he exempt income. 4. Without prejudice to the above, the Appellant submits that the disallowance u/s. 14A of the Act is excessive and the same ought to be reduced substantially. B. GENERAL: 5. The Appellant craves leave to add to, alter, amend or vary all or any of the aforesaid ground(s) of appeal as they/their representative may deem fit. 2. Briefly stated, the assessee company which is engaged in the business of generation of electricity had filed its return of income for A.Y. 2014-15 on 28.11.2014, declaring a total income of Rs.nil. The return of income was initially processed as such under Sec. 143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2) of the Act. 3. During the course of the assessment proceedings it was observed by the A.O that the assessee during the year in question had earned dividend income of ₹ 1,88,58,934/- from investments made in exempt income yielding shares. However, it was noticed by the A.O that the disallowance offered by the assessee under Sec. 14A was not commensurate with the proportion of the investments made in the exempt income yielding assets. Backed by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. It was submitted by the ld. Authorized Representative (for short A.R ) for the assessee that the CIT(A) had erred in confirming the disallowance under Sec. 14A to the extent of the exempt income that was earned by the assessee during the year in question. It was observed by the ld. A.R that the disallowance under Sec. 14A r.w Rule 8D(2)(iii) ought to have been worked out with reference to the investments that had yielded exempt income during the year in question, and it was only if the disallowance therein so worked out exceeded the exempt income that the disallowance contemplated in the said statutory provision was liable to be restricted to the extent of the exempt income. 6. Per contra, the ld. Departmental Representative (for short D.R ) relied on the assessment order. 7. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. Admittedly, the CIT(A) while fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as it may, in our considered view, now when the disallowance under Sec. 14A r.w Rule 8D(2)(iii), as claimed by the assessee, is found to be lower than the amount of the exempt income that was received by it during the year in question, the disallowance under the aforesaid statutory provision was liable to be restricted only to the extent the same was computed under Sec. 14A r.w Rule 8D(2)(iii). In our considered view, the intent of the first appellate authority to restrict the disallowance under Sec.14A to the extent the same is worked out u/rule 8D(2)(iii), subject to an upper limit i.e the amount of the exempt dividend income that was earned by the assessee during the year in question can safely be gathered from a conjoint perusal of his observations recorded in the appellate order. Be that as it may, in order to dispel any doubts, we herein direct the A.O to restrict the disallowance under Sec. 14A r.w Rule 8D to the extent the same is worked out u/rule 8D(2)(iii) i.e after excluding the investments that had not yielded any exempt income during the year in question, as directed by the CIT(A), subject to an upper limit as that of the exempt dividend income that was earned by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e during the year in question while computing the disallowance within the meaning of Rule 8D(2)(iii) of the Income-tax Rules, 1962. Also, the revenue is aggrieved with the observation of the CIT(A) that the disallowance computed under Sec. 14A r.w Rule 8D was not required to be added to the book profit under Sec. 115JB of the Act. 12. We have given a thoughtful consideration to the aforesaid claims of the revenue and are afraid that the same does not find favour with us. As observed by the CIT(A), the Special bench of the ITAT Dehli in the case of ACIT Anr. Vs. Vireet Investments Pvt. Limited Anr. (2017) 165 ITD 27 (Delhi) (SB) had clearly observed that for the purpose of computing the average value of investments within the meaning of Rule 8D(2)(iii) the investments which had not yielded any exempt income during the year are liable to be excluded. Also, the Special bench of the Tribunal had observed, that computation under clause (f) of Explanation 1 to Sec.115JB(2) is to be made without resorting to the computation contemplated under Sec. 14A r.w Rule 8D of the Income Tax Rules,1962. Accordingly, finding no infirmity in the view taken by the CIT(A) w.r.t the af ..... X X X X Extracts X X X X X X X X Extracts X X X X
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