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| The Tax Publishers2020 TaxPub(DT) 1975 (Pune-Trib) INCOME TAX ACT, 1961
Section 14A Rule 8D(2)(iii)
Section 14A refers to disallowance of expenses incurred in relation to earning exempt income which does not form part of the total income. Considring wording of the section, disallowance should be worked out on only those investments on which any exempt income is received during the year. Accordingly, AO was directed to re-compute disallowance under rule 8D(2)(iii) by considering only such investments in calculating average value of investments in shares and debentures which yielded exempt income during the year.
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Disallowance under section 14A - Expenditure against exempt income - Invocation of rule 8D(2)(iii) - Computation of average value of investments
Assessee earned tax free dividend income on some of the investments in shares. AO considered entire investments for computation of average value of investments so as to make disallowance under section 14A read with rule 8D(2)(iii).Held: Section 14A refers to disallowance of expenses incurred in relation to earning exempt income which does not form part of the total income. Considring wording of the section, disallowance should be worked out on only those investments on which any exempt income is received during the year. Accordingly, AO was directed to re-compute disallowance under rule 8D(2)(iii) by considering only such investments in calculating average value of investments in shares and debentures which yielded exempt income during the year.
Relied:Asstt. CIT v. Vireet Investment (P) Ltd., 82 Taxmann.com 415 : 2017 TaxPub(DT) 1760 (Del-Trib) and Quick Heal Technologies Ltd. vide ITA No. 1500 & 1710/PUN/2017, dated 12-3-2019 : 2019 TaxPub(DT) 2688 (Pune-Trib).
REFERRED :
FAVOUR : Partly in assessee's favour.
A.Y. :
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