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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI R.S. SYAL & SHRI S.S. VISWANETHRA RAVI
PER R.S.SYAL, VP :
This appeal by the assessee arises out of the order passed by the Commissioner of Income-tax (Appeals)-3, Pune on 27.02.2017 in relation to the assessment year 2012-13.
The only issue raised in this appeal is against the confirmation of disallowance of Rs.54,50,000/- u/s.14A of the Income-tax Act, 1961 read with Rule 8D of the Income-tax Rules, 1962.
2 ITA No.1239/PUN/2017 Avinash N. Bhosale
Briefly stated, the facts of the case are that the assessee earned
exempt income of Rs.80.14 lakh as share from partnership firms and
Rs.25.05 lakh as dividend and PPF interest etc. No disallowance
u/s.14A was offered. The Assessing Officer, on getting satisfied,
computed the disallowance u/s.14A read with Rule 8D(2)(iii) at
Rs.54,50,000/-, being 0.5% of the average value of investments.
The ld. CIT(A) affirmed the disallowance.
We have heard both the sides and gone through the relevant
material on record. The ld. AR fairly admitted that the disallowance
u/s.14A is called for. He, however, submitted that in computing
such disallowance only those investments should be considered
which have yielded exempt income.
Ordinarily the disallowance is made at 0.5% of the average
value of investments under rule 8D(2)(iii). However, in this regard,
it is relevant to note that the Hon’ble Delhi High Court in ACB
India Ltd. vs. CIT (2015) 374 ITR 108 (Del) has held that the
average value of investments, for the purposes of Rule 8D(2)(iii),
should be confined to those securities in respect of which exempt
income is earned and not the total investments. Similar view has
been taken by the Special Bench of the Tribunal in the case of ACIT
vs. Vireet Investments (P) Ltd. (2017) 165 ITD 27 (Del) (SB)
3 ITA No.1239/PUN/2017 Avinash N. Bhosale
holding that only those investments should be considered for
computing average value of investments which yield exempt
income during the year. Respectfully following the precedents, we
set-aside the impugned order and remit the matter to the file of the
AO for computing the disallowance under Rule 8D(2)(iii) in
accordance with our above observations.
In the result, the appeal is allowed for statistical purposes.
Order pronounced in the Open Court on 17th September, 2019.
Sd/- Sd/- (S.S. VISWANETHRA RAVI) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; �दनांक Dated : 17th September, 2019 सतीश आदेश क� क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to: अ�ेिषत आदेश आदेश आदेश अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. 3. The CIT(A)-3, Pune 4. The Pr. CIT-2, Pune िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे 5. “बी” / DR ‘B’, ITAT, Pune; 6. गाड� फाईल / Guard file. आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER, आदेशानुसार
// True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune
ITA No.1239/PUN/2017 Avinash N. Bhosale
Date 1. Draft dictated on 17-09-2019 Sr.PS 2. Draft placed before author 17-09-2019 Sr.PS 3. Draft proposed & placed JM before the second member 4. Draft discussed/approved JM by Second Member. 5. Approved Draft comes to Sr.PS the Sr.PS/PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *