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| The Tax Publishers2021 TaxPub(DT) 0924 (Kol-Trib) INCOME TAX ACT, 1961
Section 14A
Only investments which yielded dividend income should be considered for the purpose of computing of disallowance under rule 8D(2)(iii), therefore, AO was directed to consider the disallowance made under rule 8D(2)(iii) should be restricted to the average of the opening and closing value of those investments which actually yielded dividend income during the relevant financial year.
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Disallowance under section 14A - Expenditure incurred against earning of exempted income - Only those investments should be considered which actually yielded exempt income -
Assessee preferred this appeal which was in respect of computing disallowance by applying section 14A read with rule 8D(2)(iii) of the Income Tax Rules, 1962. According to assessee, even though CIT(A) while passing first appellate order followed the decision of this Tribunal in the case of REI Agro Ltd. v. Dy. CIT (2013) 144 ITD 141 (Kol-Trib) : 2013 TaxPub(DT) 2256 (Kol-Trib), wherein it was held that the average value of investment used in rule 8 comprised of only those investments which actually yielded exempt income during the year and, therefore, the disallowance under rule 8D(2)(iii) should be restricted to average of the opening and closing value of those investments appearing in balance sheet as on 01-4-2014 and 31-3-2015 which actually yielded dividend income during the relevant financial year. Held: Law applicable on this issue will be as laid in REI Agro Ltd. v. Dy. CIT (2013) 144 ITD 141 (Kol-Trib) : 2013 TaxPub(DT) 2256 (Kol-Trib) wherein this Tribunal had directed that only investments which yielded dividend income should be considered for the purpose of computing of disallowance under rule 8D(2)(iii). Thus, directions given by CIT(A) with regard to three specific investments made in mutual fund to AO to consider the monthly average of such dividend bearing investment have not the sanction of law. Therefore, AO was directed to consider the disallowance made under rule 8D(2)(iii) should be restricted to the average of the opening and closing value of those investments appearing as on 01-04-2014 and 31-3-2015 which actually yielded dividend income during the relevant financial year.
Followed:Hindustan Zinc Ltd. v. Commissioner of CGST [Excise Appeal No. 52264 of 2019, dt. 26-2-2020] and REI Agro Ltd. v. Dy. CIT (2013) 144 ITD 141 (Kol-Trib) : 2013 TaxPub(DT) 2256 (Kol-Trib).
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2015-16
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