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2019 (7) TMI 1322 - AT - Income TaxRevision u/s 263 - Addition u/s 14A r.w.r. 8D - whether the order passed by the AO u/s 153A/143(3) dated 30.03.2015 is erroneous as well as prejudicial to the interest of the revenue? - HELD THAT:- Disallowance under Rule 8D(2) (i) is concerned, as it relates to expenditure directly related to the exempted income. Since the direct expenditure is nil therefore disallowance is not required. Hence, order passed by the AO is neither erroneous nor prejudicial to the interest of Revenue so far Rule 8D (2) (i) disallowance is concerned. We note that Rule 8D (2) (ii) relates to disallowance of interest expenditure. The ld Counsel submitted before us the Balance Sheet for A.Y.2013-14, where we note that total own funds consisting share capital and reserve and surplus are which is more than the total investments of ₹ 20,69,06,913/-. - Bombay High Court in the case of CIT Vs Reliance Utilities & Power Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT] has held that if there were funds available both interest free and over draft/loans are taken, then a presumption would arise that investment would be out of the interest free funds generated or available with the assessee, if the interest free funds were sufficient to meet the investment. Therefore, so far Rule 8D (2) (ii) is concerned, order passed by the AO is neither erroneous nor prejudicial to the interest of Revenue. Coming to the third limb, that is, so far Rule 8D (2) (iii) is concerned, we note that the Co-ordinate Bench of ITAT Kolkata in the case of REI Agro Ltd. [2013 (9) TMI 156 - ITAT KOLKATA] has held that it is only the investment which yields dividend during the previous year that has to be considered while adopting the average value of investment for the purpose of Rule 8D(2)(iii). The aforesaid view of the Tribunal has since been affirmed by the Hon’ble Calcutta High Court as correct in [2014 (4) TMI 713 - CALCUTTA HIGH COURT] in the appeal against the order of the Tribunal in the case of REI Agro Ltd (supra). Therefore, assessing officer is supposed to take dividend bearing investments for the purpose of disallowance under Rule 8D(2) (iii) of the Rules, which he had not done, therefore order passed by him is erroneous and prejudicial to the interest of the Revenue, so far third limp Rule 8D(2) (iii) is concerned. That is, AO has not made disallowance under rule 8D(2) (iii) of the Rules, at all. Therefore, we direct the AO to compute the disallowance under rule 8D (2) (iii) taking into account only dividend bearing securities as narrated in the judgment of the Coordinate Bench in the case of REI Agro (supra). - Decided in favour of assessee.
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