Doubt on section 14A read with rule 8D

Dear Ankit,

1) Investment in C will be considered in the "Avg of Investment (Numerator)" if it generates tax free income like dividend or exempt interest. Where as if C is an instrument that generates Taxable Income then it will be excluded

2) Misc. expenditure will remain included in the "Total Assets (Denominator)".

Very nicely explained. While calculating average of investments it is not necessary that the investments have generated any income till the time the income generated will be like dividends which will be exempt. In case of debentures who generate interest income should not be included in the average investments.

In case of Total Asset Average Misc Exp being not present any actual asset in books should be ignored while current liablities which are deducted from Current asset for Net current asset should be added to found Total Asset.