IN HIGH COURT OF DELHI AT NEW DELHI ITA 322/2015 COMMISSIONER OF INCOME TAX-IV.Appellant Through: Mr.Kamal Sawhney, Sr.Standing Counsel and Mr.Raghvindra Singh, Jr.Standing Counsel. versus DEN NETWORKS LIMITED.Respondent Through: None. CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE R.K.GAUBA ORDER % 22.05.2015 1. Revenue is aggrieved by order of Income Tax Appellate Tribunal (ITAT) accepting assessee s plea with respect to disallowance under Section 14A read with Rule 8D of Income Tax Act, 1961. 2. In given Assessment Year (AY) 2008-09, assessee was engaged in independent business and declared income against two heads reported as short terms capital gain of 1.18 crores and income from other sources to tune of 31 lakhs. total income was about 1.5 crores. other claim of loss was in excess of that amount. assessee s return and books reveals accrual of tax income exemption of 25 lakhs. Assessing Officer (AO) applied Rule 8D and directed addition of 75 lakhs (or about 300% of its exemption income earned). CIT (Appeal) granted partial review and confirmed approximately 50% of addition under Section 14A made by way of disallowance. On further appeal, ITAT was significantly influenced by fact that assessee had not applied any borrowed fund towards investment that yield exemption income. In these circumstances, it set aside CIT (Appeal) s order. 3. Learned counsel for Revenue contends that ITAT s approach is erroneous given mandate of Rule 8D(2)(ii). It is urged that assessment made by CIT(A) after granting partial relief to assessee was justified and has to be restored. 4. We have considered submissions. AO s initially determined disallowance to extent of 75,41,105/- as against tax exemption income earned by assessee of 25,77,300/-, was finally incorrect and excessive. It is based on misapplication of Rule 8D(2)(ii). CIT(Appeal), to certain extent dealt with that misapplication but fact remains that tax exempt income of 25 lakhs was in effect brought to tax by disallowance of Rs. 37 lakhs. Moreover, relevant component of expenditure was on account of interest paid by assessee. ITAT after examining records has returned clear finding that no interest element could be attributed to earning of exempt income. 5. In these circumstances, Court sees no reason to interfere with ITAT s order. No substantial question of law arises. appeal is dismissed in above terms. S. RAVINDRA BHAT, J R.K.GAUBA, J Commissioner of Income-tax-IV v. Den Networks Limited