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2015 (10) TMI 1270 - ITAT MUMBAI

2015 (10) TMI 1270 - ITAT MUMBAI - TMI - Revision u/s 263 - AO ought to have examined the allowability of interest expenditure u/s. 36(1 )(iii) when interest free funds were advanced by appellant - assessing officer ought to have considered the interest expenditure directly attributable to taxable business income for disallowance u/s. 14A of the Act read with rule 8D(2)(ii) - Held that:- It is seen by us that vide questionnaire dated 8th June 2011, the AO asked the assessee to furnish the detail .....

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eplies and evidences of the assessee, the AO had passed detailed order u/s 143(3). It is noted by us that in the assessment order passed u/s 143(3), the AO had made detailed discussion in the assessment order for making disallowance u/s14A for an appropriate amount. The AO has specifically mentioned in the table reproduced at page 4 of the assessment order that expenditure by way of interest was allowable. Thus, in our considered view, the AO has taken the view after considering all the factual .....

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on of the facts by the AO. Thus, in our considered opinion, view taken by the AO was one of the possible views as per law and facts and therefore, Ld. CIT could not have exercised jurisdiction u/s 263 to set aside the assessment order passed u/s 143(3). Also it has been shown by ld. Counsel, on the basis of material on record, that loan from HDFC Bank was specifically taken by the assessee for the purpose of procuring raw material i.e. Castor Seeds. This fact is cross verified with the help of s .....

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not arise - Decided in favour of assessee. - ITA NO.3128/Mum/2013 - Dated:- 9-9-2015 - Shri Joginder Singh, Judicial Member, and Shri Ashwani Taneja, Accountant Member For The Assessee : Shri Madhur Agarwal (AR) For The Respondent : Mrs. Neera Singh Panday(DR) ORDER Per Ashwani Taneja (Accountant Member): The present appeal has been filed by the assessee against order dated 22.02.2013, passed u/s 263 by the Ld. Commissioner of Income Tax-8, Mumbai for the assessment year 2009-10. The assessee ha .....

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oints raised in his notice have duly been examined by the learned Assessing Officer during the course assessment proceedings. d. The learned Commissioner of Income-tax has passed the order ignoring the fact that the points raised in his notice have duly been examined by the learned Assessing Officer during the course assessment proceedings. Without prejudice to the foregoing and on the facts of the case 2. The learned Commissioner of Income Tax grossly erred in holding that the order passed by a .....

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red the interest expenditure directly attributable to taxable business income for disallowance u/s. 14A of the Act read with rule 8D(2)(ii) even when the assessing officer formed his view to not include the same while calculating disallowance u/s. 14A r.w.r 8D. 3. The appellant craves leave to add, alter, amend or delete any of the above referred ground of appeal. 2. The Brief facts are that the assessee company filed its return of income for A.Y. 2009-10 on 29.09.2009. Thereafter, the AO passed .....

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terest income in respect of loans and advances given by it. The Ld. CIT gave further show cause notice, asking the assessee to furnish documentary evidences to show that advances were made out of own funds and to show business exigency for giving such interest free loans. Ld. CIT gave further notice to the assessee dated 14.12.2012 on the ground that the disallowance made by the AO in the aforesaid assessment order under rule 14A r.w. Rule 8D is not sufficient, as perusal of para 4.5 of the asse .....

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e 8D. 3. The Ld. CIT was not satisfied with the response given by the assesee and therefore revision order u/s 263 was passed by the Ld. CIT, holding that AO ought to have included the impugned interest expenditure of ₹ 2,76,45,849/- as per sub-clause (ii) of Rule 8D(2) for the purpose of disallowance u/s 14A read with Rule 8D. It was further held by the Ld. CIT that the AO ought to have examined the allowability of the interest expenditure claimed by the assessee in terms of section 36(1) .....

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was set aside and AO was directed to examine the above issues on the lines as detailed by the Ld. CIT in the impugned order. 4. During the hearing before us, Ld. Counsel of the assessee made detailed submissions. First submission of Ld. Counsel was that Ld. CIT has fell into grave error by not appreciating the facts correctly and committed a mistake by not appreciating the fundamental facts that own funds of the assessee were far in excess of amount of advance given, and in the given facts no di .....

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3(3), wherein this aspect has been examined and discussed by the AO in the assessment order passed. Few other submissions were also made by the Ld. Counsel to assail the order of Ld. CIT. In nutshell, it was argued by the Ld. Counsel that the assessment order passed u/s 143(3) was factually correct and neither it was erroneous nor prejudicial to the interest of the revenue, and more so, when one of the possible views was taken by the AO after making detailed examination, the jurisdiction of the .....

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sheets enclosed in the paper book. 6. We have heard both the parties very carefully and we have gone through original assessment order passed u/s 143(3) as well as the impugned order passed u/s 263 by the Ld. CIT. It is noted by us that in the original assessment proceedings u/s 143(3), the AO had made detailed inquiries with respect to the issue raised by the Ld. CIT in the order passed u/s 263. It is seen by us that vide questionnaire dated 8th June 2011, the AO asked the assessee to furnish t .....

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l these replies and evidences of the assessee, the AO had passed detailed order u/s 143(3). It is noted by us that in the assessment order passed u/s 143(3), the AO had made detailed discussion in the assessment order for making disallowance u/s14A for an appropriate amount. The AO has specifically mentioned in the table reproduced at page 4 of the assessment order that expenditure by way of interest was allowable. Thus, in our considered view, the AO has taken the view after considering all the .....

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point out anything wrong in appreciation of the facts by the AO. Thus, in our considered opinion, view taken by the AO was one of the possible views as per law and facts and therefore, Ld. CIT could not have exercised jurisdiction u/s 263 to set aside the assessment order passed u/s 143(3). We derive support from the judgment of Hon ble Jurisdictional High Court in the case of CIT v. Gabriel India Ltd. 203 ITR 108 (Bom) and Sunbeam Auto Ltd. 332 ITR 167 (Delhi). 7. In addition to this, it is fu .....

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act is on record and stands uncontroverted till date, then it can be safely said that the loan has been utilized for the purpose of the business of the assessee and consequently the deduction of interest will be allowable u/s 36(2)(iii) of the Act and therefore, question of applicability of section 14A would not arise. The assessee has been submitting since the time of original assessment proceedings that the borrowed funds have not been used for giving interest free loans or for making the tax .....

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es remain uncontroverted by the Ld. CIT, DR. In any case, it is further noted by us that Hon ble Jurisdictional High Court in the cases of CIT. Vs. Reliance Utilities & Power Limited (supra) and CIT vs. HDFC Bank Ltd. ( 2014) 366 ITR 505 (Bom.) has held that if interest free funds available with the assessee are sufficient to meet the tax free investments and at the same time if the assessee has raised interest bearing loans, then in such circumstances, it should be presumed that the tax fre .....

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