TMI Blog2019 (4) TMI 192X X X X Extracts X X X X X X X X Extracts X X X X ..... essee has not produced the relevant details to show the moment of the fund in the OD account and specifically the credit/deposits made in the OD account so as to support its contention that the assessee’s own fund was utilized for investment in mutual funds and not the borrowed funds. In absence of the relevant details and evidence, the issue cannot be decided conclusively. Hence, we are constrained to remand the matter to the AO for verification of the source of fund. Disallowance u/s 14A - HELD THAT:- Disallowance U/s 14A of the Act on account of interest expenditure, this issue is common to the disallowance of interest expenditure made by the Assessing Officer U/s 36(1)(iii) of the Act in ground No. 1 of the appeal. Hence, in view of our finding and observation on ground No. 1 of the revenue’s appeal, this issue is set aside to the record of the Assessing Officer on same terms for verification of the moment of the fund and actual source of investment in the mutual funds. Disallowance on account of common/indirect administrative expenditure being 0.5% of the average investment as per Rule 8D(2)(iii) of the Rules - Since the dividend income during the year is only ₹ 1, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also made disallowance U/s 14A of the Act of ₹ 1,62,04,699/-. On appeal, the ld CIT(A) deleted the addition by considering some fresh evidence without giving an opportunity to the Assessing Officer. The matter was carried to this Tribunal by the revenue and the Tribunal vide order dated 04/8/2016 remitted the matter back to the record of the Assessing Officer for deciding the issue afresh after verification and examination of the additional evidence as well as giving an opportunity of hearing to the assessee. In the set aside proceedings, the Assessing Officer has repeated the addition as made in the original assessment. The ld. CIT(A) in the second round has again deleted the addition except the disallowance of interest to the extent of ₹ 77,733/- and disallowance U/s 14A was restricted to the dividend income at ₹ 1,81,392/-. Thus, this is second round of appeal. Here the revenue has again challenged the order of the ld. CIT(A) deleting the additions made by the Assessing Officer. 4. The ld DR has submitted that the Assessing Officer noted that the assessee has made an investment of ₹ 130,31,56,964/- in the mutual fund units. The source of the same was f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld AR has further submitted that the profit in the year under consideration is also more than the investment made in the mutual funds. He has relied on the order of the ld. CIT(A). 6. We have considered the rival submissions as well as relevant material on record. The Assessing Officer has made disallowance on account of interest expenditure by considering the debit balance in the OD account of ₹ 5,25,93,672/- and then applied average interest rate of 12.6% on the said debit balance to arrive the amount of ₹ 66,26,803/-. On appeal, the ld. CIT(A) has restricted the said disallowance to ₹ 77,733/- being the actual interest charged on the OD account during the year under consideration. The relevant finding of the ld. CIT(A) in para 3.1.2 is as under: 3.1.2 Determination: I have duly considered the submissions of the appellant, assessment order, remand report of the AO and its rejoinder by the appellant and the material placed on record. In the assessment order, it has been observed by the AO that the appellant has made investment of ₹ 130.31 Crore in mutual funds. It was also observed by the AO that other than redemption of earlier years of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OD account of the assessee. There is no dispute that the assessee has made the investment of ₹ 130.31 crores in the mutual funds and the said investment was made through the OD account. However, since the debit balance in the OD account did not remain for a long period as there was a corresponding deposits in the OD account, therefore, the interest charged on the OD account is very less. The Assessing Officer while disallowing the proportionate interest has considered the average interest rate by considering the overall interest liability of the assessee, we find that the assessee s total interest expenditure during the year under consideration is ₹ 28,05,45,911/- consisting of interest on term loan, interest on inter corporate deposits, financial charges, bank charges, interest on OD account etc.. We further note that the OD account of the assessee has been credited from time to time and some of the credits at the time of investment in the mutual funds was of ₹ 8.14 crores, 9.25 crores, 7.40 crores. etc. However, neither the Assessing Officer nor the ld. CIT(A) has verified the source of these credits in the OD account whether these transfers in the OD accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer has made total disallowance U/s 14A of the Act at ₹ 1,62,04,699/-. The said disallowance made by the Assessing Officer was challenged before the ld. CIT(A). The ld CIT(A) held that the investment in mutual funds was made by the assessee from his own funds and therefore, no disallowance is called for on account of interest expenditure U/s 14A of the Act. As regards the disallowance of common administrative expenditure, the ld. CIT(A) has restricted the same to the dividend income earned by the assessee of ₹ 1,81,392/-. 9. Before us, the ld DR has submitted that as far as the investment made by the assessee from his own funds, the ld. CIT(A) has not examined the correct source of funds for making investment in mutual funds. This issue is common as the disallowance made by the Assessing Officer U/s 36(1)(iii) of the Act, therefore, the finding of the ld. CIT(A) is not based on the correct facts. The disallowance made on account of indirect/common administrative expenditure, the ld DR has relied upon the order of the Assessing Officer. 10. On the other hand, the ld AR of the assessee has submitted that the assessee is having its own interest fre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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