The Tax Publishers2021 TaxPub(DT) 0899 (Hyd-Trib)

INCOME TAX ACT, 1961

Section 14A Rule 8D

Where in case of Transport Corporation of India Ltd. [ITA No. 117/Hyd/2016 vide Order, dated 21-9-2016: 2016 TaxPub(DT) 4521 (Hyd-Trib)], it was directed to calculate the disallowance of expenditure under rule 8D(2)(iii) taking the average investment from which the exempt income was received, AO was directed to calculate the disallowance under rule 8D(2)(iii) in line with the above decision, and not on the entire investment made.

Disallowance under section 14A - Expenditure against exempt income - Applicability of Rule 8D(2)(iii) - Whether on entire investment or on which assessee earned exempt income

AO noticed that assessee had claimed exempt income under section 10(34), against which, assessee had not disallowed suo-moto any expenditure under section 14A. Thus, he applied rule 8D and calculated the disallowance under rule 8D(ii) and rule 8D(2)(iii).Held: Rule 8D(2)(iii) is clear that disallowance should be made under the said rule on those investments, on which the assessee earns exempt income, but, not on the entire investments. In this connection, in the case of Transport Corporation of India Ltd. [ITA No. 117/Hyd/2016 vide Order, dated 21-9-2016: 2016 TaxPub(DT) 4521 (Hyd-Trib)], it was directed to calculate the disallowance of expenditure under rule 8D(2)(iii) taking the average investment from which the exempt income is received. Following the above decision, AO was directed to calculate the disallowance under rule 8D(2)(iii) in line with the above decision.

Followed:Transport Corporation of India Ltd. [ITA No. 117/Hyd/2016 vide Order, dated 21-9-2016]: 2016 TaxPub(DT) 4521 (Hyd-Trib).

REFERRED :

FAVOUR : In favour of assessee.

A.Y. : 2013-14



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