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TMI Blog2023 (12) TMI 541X X X X Extracts X X X X X X X X Extracts X X X X ..... ome under this Act, has not accrued or arisen or has not been received during the previous year relevant to an assessment year and the expenditure has been incurred during the said previous year in relation to such income not forming part of the total income. ? 3. Facts relevant to the aforesaid grounds as noted by Ld. CIT(A) is as under: - "6.1 During the course of assessment proceedings, the AO observed that the assessee company had claimed exempt income of Rs. 859,23,74,682/-. The assessee company had suo-moto disallowed a sum of Rs. 22,55,27,357/- u/s 14A of the Act. The AO asked the assessee to furnish the computation of the disallowance made by it. It was noticed from the details furnished by the assessee that while computing the disallowance the assessee only considered the investment on which it had earned exempt income and excluded those investment which were capable of generating exempt income. The assessee was show-caused as to why the disallowance u/s.14A should not be in accordance with Rule 8D of the Income Tax Rules, 1962 as, according to the AO all investments were to be considered for working out such disallowance. The assessee submitted that it had already made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stment that earned exempt income and that did not result into exempt income to the AO and the AO is directed to compute disallowance u/s 14A taking average investment of those investments that have yielded the exempt income, My Ld. Predecessor, while deciding the appeal of the assessee for AY 2017-18 had also taken this view and I also see no reason to deviate from this view. Accordingly, this ground of appeal is partly allowed." 5. Aggrieved by the aforesaid action of Ld. CIT(A), the revenue has preferred this appeal. 6. Assailing the action of Ld. CIT(A), the Ld. CIT-DR contended that Ld. CIT(A) erred in directing the AO to compute disallowance u/s 14A of the Act taking average investment of those investments that have yielded the exempt income. The Ld. DR referring to the amendment brought in by Finance Act, 2022 wherein Explanation was inserted under proviso to sub section (3) of section 14A of the Income Tax Act, 1961 (hereinafter "the Act") submitted that the impugned action of Ld. CIT(A) is erroneous; and also submitted that impugned action is against the CBDT circular no. 05/2014. So, he contended that Ld. CIT(A) action is erroneous and pleaded that the impugned action of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s has excluded those investments which were capable of generating exempt income. According to AO, there was no restriction placed by section 14A of the Act that would suggest that while making disallowance under Rule 8D of the Rules only investment need to be considered which yielded exempt income. And after referring to CBDT Circular No.05/2014 and amendment brought in by Finance Act, 2022, he re-computed the disallowance u/s 14A of the Act at Rs. 61,32,09,023/- and thus disallowed further an amount of Rs. 38,76,81,666/- (Rs.61,32,09,023 minus Rs. 22,55,27,357/-). On appeal, the Ld. CIT(A) upheld the contention of assessee that disallowance under Rule 8D(2)(iii) of the Rules should be made only on investment which yielded exempt income by referring to Special Bench decision of this Tribunal in ACIT Vs. Vireet Investment (P) Ltd. (2017) 82 taxmann.com 415 (Delhi-Trib) (SB) and further directed the assessee to submit before AO, the bifurcation of investment that earned exempt income as well as investment which did not result in exempt income and directed AO to re-compute the disallowance u/s 14A of the Act by taking the average investment of those investment that have yielded the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e addition by holding as under: - "7.4 In the appellate order passed for AY 2013-14, my Ld Predecessor, while deciding the same issue, had observed that in the assessment order u/s 153A the AO had made the disallowance of ESOP expenses, which was made originally in the assessment order u/s 143(3) for A.Y. 2013-14. My Ld. Predecessor further observed that the CIT(A)-22, Delhi had deleted the disallowance of ESOP. expenses made in the order u/s 143(3) for the same assessment year, i.e. A.Y. 20 3-14. Further, the CIT(A)-XV, Delhi in the case of M/s Indiabulls Financial Services Limited (now merged with the assessee company) had also allowed ESOP expenses for AY 201112. Since, there was no change in the facts of the issue at hand, therefore, my Ld. Predecessor found no reason to deviate from the decision taken by the CIT(A)-22 and CIT(A)-IV, Delhi in respect of AY 2013-14 also. Thus, the disallowance of ESOP expenses made by the AO was deleted for AY 2013-14. The Hon'ble Mumbai ITAT in the assessee's own case for AY 2013-14 in ITA NO.1414/MUM/2022 (order dated 31.10.2022) has also upheld the decision of the Ld CIT(A) in deleting the addition on the issue of ESOPs and dismissed the de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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