The assessee made suo-moto disallowance under section 14A of the Act. However, the AO did not concur with the calculation of the assessee and made additional disallowance under Rule 8D(2)(ii) of the Act. The CIT(A) gave partial relief to the assessee.

On appeal before the Tribunal, it was held that when the assessee had sufficient owned (interest free) funds, it was to be presumed that the investments were made from such interest free funds. Hence, there was no scope to disallow interest under Rule 8D(2)(ii)of the Act. Reliance in this regard was placed on the decision in the case of CIT v. Reliance Utilities and Power Ltd. (2009) 313 ITR 340 (Bom.)(HC)  which in turn followed the decision of in the case of East India Pharmaceutical Works Ltd. v. CIT (1997) 224 ITR 627 (SC). 

Further, following the decision in the case of ACIT v. Vireet Investments (P) Ltd. (2017) 165 ITD 27 (SB) (Delhi)(Trib)  it was held that while computing the administrative expenditure disallowance under Rule 8D(2)(iii)only such investments were to be considered which yielded exempt income. (AY. 2003-04)