INCOME TAX ACT, 1961

Section 14A Rule 8D

Disallowance under section 14A - Divinded income - Expenditure against exempt income -

Assessee-company earned dividend income during the year 2012-13 relevant to assessment year 2013-14. Since, the assessee did not admit any expenditure to earn the dividend income, AO by invoking provisions rule 8D, made disallowance under section 14A. On appeal, CIT(A) confirmed the said disallowance. Assessee submitted that it had sufficient own funds for making investments and no part of borrowed funds were used for making investments and prayed for deleting the disallowance of expenditure. Further, it was submitted that if at all any disallowance had to be made, only those investments were to be considered for computing the average value of investment that yielded exempt income during the year.Held: Assessee submitted that it had sufficient own funds for making investments and no part of borrowed funds were used for making investments and prayed for deleting the disallowance of expenditure. However, neither in assessment order nor in appellate order, the authorities mentioned anything as to whether the assessee had sufficient own funds for making investments or borrowed funds were used by the assessee for making investments. Thus, the order of CIT (A) was set aside and matter back was remanded to AO to verify as to whether the assessee was having sufficient own funds on the date of investments and decide the issue afresh relating to disallowance under rule 8D(2)(ii). Further, the AO was directed to consider only those investments for computing average value of investment, which yielded exempt income during the year under consideration as per rule 8D (2)(iii).

Followed:Asstt. CIT, Circle 17 (1), New Delhi v. Vireet Investment (P) Ltd. (2017) 82 Taxmann.com 415 Del (SB) : 2017 TaxPub(DT) 1760 (Del-Trib).

REFERRED :

FAVOUR : Matter remanded.

A.Y. : 2013-14 & 2014-15

INCOME TAX ACT, 1961

Section 115JB

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