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TMI Blog2017 (8) TMI 1611X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the same. Therefore, we find no good reason to interfere with the order of the CIT(A), which is hereby confirmed the ground of appeal is dismissed. - ITA No. 231/CTK/2015 - - - Dated:- 3-8-2017 - S/Shri N.S Saini, Accountant Member And Pavan Kumar Gadale, Judicial Member Assessee by: Shri S.C.Bhadra, AR Revenue by: Shri Kunal Singh, CIT DR ORDER N.S.Saini, This is an appeal filed by the Revenue against the order of the CIT(A), Cuttack, dated 29.12.2014, for the assessment year 2011-12. 2. In Ground Nos.1 2 of the appeal, the grievance of the revenue is that the CIT(A) erred in confirming the order of the Assessing Officer in deleting the disallowance of expenditure of ₹ 6,44,42,275/- made u/s.14A of the Act. 3. The brief facts of the case are that the Assessing Officer made disallowance u/s.14A r.w. Rule 8D of I.T.Rules for ₹ 6,44,42,275/-. 4. On appeal, the CIT(A) deleted the disallowance. 5. At the time of hearing, both the parties agreed before us that the issue is covered in favour of the assessee by the decision of this Bench of the Tribunal in assessee s own case for the assessment year 2010-2011 in ITA No.444/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowance made by the revenue authorities. 5. The CIT(A) perused the written submissions, findings of the Assessing Officer and the ratio of decisions relied by the assessee and deleted the disallowance made by the Assessing Officer, inter alia, observing as under: I have perused the assessment order framed by the AO, the grounds of appeal of the appellant, the written submission of the appellant and particularly the ratios of case laws submitted by the appellant. The genesis of computation of disallowable expenditure U/S.14A of the Act is that the AO having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income. Moreover the AO can determine the disallowable expenditure also in relation to a case where the assessee claims that no expenditure has been incurred by it in relation to income which does not form part of the total income. While computing the disallowable expenditure the AO has to put the above two tests to the accounts of the assessee. The AO should record his dissatisfaction regarding the amount already shown by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ...........According to TPO disallowance made by assessee was very less but how they are very less and how other expenses incurred by assessee related to dividend income had not been brought on record. The AO nowhere pointed out proximate connection of other expenses not apportioned by assessee for earning dividend income. The A0 has not pointed out expenses excluded by assessee for disallowance has proximate connection with dividend income. No discrepancy in claim of assessee was pointed out. The Hon'ble IT AT,) Bench Mumbai in the case of J K Investors v. AC1T (supra) also held the view that the AO can invoke Rule 8D only when he records satisfaction in regard to the correctness of the claim of the assessee, having regard to the accounts of the assessee. The Hon'ble 1TAT, A Bench Kolkata in the case of REI AGRO LTD. v. DCIT (1TA No.l331/Kol/2011 have held the same view. The appellant has emphasized on the submission that it had obtained term loans for its wind mills and purchase of machineries and equipment for its business purposes. The branch and financial institutions have directly disbursed the loan amounts to the suppliers and vendors instead of disbursing the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allocated to the tax free income received. The Hon'ble ITAT, Cuttack after observations as above have deleted the addition made by the AO u/s.!4A of the Act. From the above analysis it is clear that the AO had not recorded his satisfaction regarding not accepting the disallowable expenditure shown by the appellant. The investment in such assets were made by the appellant from its operational surplus and not from loan funds. Following the judgments of the above higher legal authorities and the judgment of the Hon'ble JTAT, Cuttack in the case of the appellant for AY 2008-09 the AO is directed to delete the addition made u/s.!4A of the Act. 6. Aggrieved by the order of the CIT(A), the Revenue has filed appeal before the Tribunal. Ld D.R. relied on the order of the Assessing Officer and submitted that the self-declared disallowance u/s.14A of the Act by the assessee is on lower side and is not in conformity with the law and prayed to restore the order of the Assessing Officer. The ld A.R. of the assessee submitted that the Tribunal in assessee s own case for A.Y. 2008-09 after considering various objections raised by the AO and judicial decisions has allowed the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est which should be disallowed, the Assessing Officer determined the same in the following manner: Capital work in progress/total loan at the end of the year x interest charged on total loan which comes to ₹ 2,30,76,352/-. 9. On appeal before the CIT(A), the assessee submitted as under: The appellant during appeal hearing submitted that The assessee has capital work in progress amounting to ₹ 31,72,99,073/- as on 31.3.2011 which is mostly comprising the amount relating to cost of its Captive Power Plant (CPP) and Ore Beneficiation Plant. The assessee has availed term loan amounting to ₹ 1,67,10,000/- for its CPP and ₹ 7,89,20,000/- for Ore Beneficiation Plant and the interest amounting to ₹ 10,63,560.81 pertaining to the term loan for CPP and interest amounting to ₹ 50,23,112.89 pertaining to term loan for Ore Beneficiation Plant has been duly capitalized under the respective heads as per the Accounting Standard 16 of 1CA1. The said interests are not charged in P L A/c. under the head Interest and Finance Charges for the relevant assessment year. The assessee has outstanding term loan amounting to ₹ 51,20,23,082/- as on 31.3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urred. From the assessment order, it appears that the AO had not verified the details regarding the capitalization of interest paid for acquiring capital assets as above by the appellant. The AO is therefore directed to delete the addition. 11. Ld D.R. relied on the order of the Assessing Officer whereas ld A.R. of the assessee supported the order of the CIT(A). 12. After considering the rival submissions and perusing the materials available on record, we find that ld D.R. could not controvert the findings of the CIT(A) to the effect that from the details of the capital work in progress of the assessee, it was evident that the same consist of cost of the captive power plant and ore beneficiation plant. The assessee had availed term loan for setting up of the plants and has capitalized the interest pertaining to the term loans for both the plants. The assessee has capitalised as per Accounting Standard of 16 of ICAI. The assessee had submitted details of interest and finance charges incurred by it and the accounts regarding capitalization of the same. Therefore, we find no good reason to interfere with the order of the CIT(A), which is hereby confirmed the ground of appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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