Case Law Details
DCIT Vs HCL Comnet Systems & Services Ltd (ITAT Delhi)
ITAT Delhi held that strategic investments not yielding any exempt income during the year under consideration, the same cannot form part of the average value of investment for computing disallowance under rule 8D(2)(iii) of the Income Tax Rules.
Facts- The assessee is a resident corporate entity and is stated to be engaged in the business of providing remote infrastructure management services and telecommunication services.
In course of assessment proceedings, AO noticed that in the year under consideration, the assessee had earned exempt income by way of dividend earned on investments made in mutual fund. Whereas, suo motu, the assessee has disallowed an amount of Rs.1,32,364/- for earning the exempt income.
Being of the view that suo motu disallowance made by the assessee is not in accordance with Rule 8D(2)(iii), AO issued a show cause notice to the assessee to explain why disallowance should not be computed strictly in terms with the aforesaid Rule. AO remained unconvinced with the reply furnished proceeded to compute the disallowance under Rule 8D(2)(iii) read with section 14A at Rs.1,39,87,135/-.
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