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2016 (3) TMI 312 - ITAT MUMBAI

2016 (3) TMI 312 - ITAT MUMBAI - TMI - Disallowance u/s 14A r.w. Rule 8D - Held that:- Hon'ble Jurisdictional High Court in the case of CIT v. HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT ] has laid down the proposition that, if the assessee's capital, profits, reserves and surplus and current account deposits are higher than the investments in tax free securities, then it would be presumed that the investments made by the assessee would be out of interest free funds available with the a .....

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SAIN, JUDICIAL MEMBER For The Assessee by : Shri J.D. Mistry and Shri Surendra Nijsure For The Revenue by : Shri Prakash Ojha, DR ORDER PER JASON P. BOAZ, AM : These are cross appeals, by Revenue and the Assessee, directed against the order of the CIT(Appeals)-4, Mumbai dt. 5.10.2012 for Asst. Year 2009-10. 2. The facts of the case, briefly, are as under :- 2.1 The assessee company, engaged in the business of syndication of loans, placement of bonds and other financial instruments, filed its ret .....

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ld. CIT(A)-4, Mumbai allowed the assessee partial relief vide the impugned order dt. 5.10.2012. 3. Both Revenue and the Assessed, being aggrieved by the order of the CIT(Appeals)-4, Mumbai for Asst. Year 2009-10, have preferred appeals before the Tribunal in respect of those aspects of the case that, in their view, have been held against them. We shall take up these two appeals hereunder: Assessee s appeal for Asst. Year 2009-10 in ITA No. 7708/Mum/2012 4. In this appeal, the assessee has raise .....

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e to above grounds of appeal, the learned CIT(A) erred in law and on facts in ignoring that for the purpose of computing the disallowance under Rule 8D following adjustments were required to interest expenditure and investments: a. that there was interest income of ₹ 3,49,97,157/- as against the interest expenses and as such only the net interest should have been considered for the purpose of computation under Rule 8D. b. that the interest on a bank facility taken for trading in bonds and .....

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ere strategic investments and have neither being made with the intention of earning exempt income nor have resulted in earning any exempt income and these investments should have been excluded from the total investments while applying Rule 8D. 5. Ground no. 1 is general in nature and therefore no specific adjudication is called for thereon. 6. Ground no. 2 - Disallowance u/s 14A r.w. Rule 8D 6.1 In this ground, the assessee contends that the ld. CIT(A) ignored the fact that the entire investment .....

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income. It was submitted that no disallowance u/s 14A of the Act was made as the assessee had utilized its own surplus funds for investments and that no expenditure had been incurred by the assessee for earning the exempt dividend income. The AO, however, did not accept the assessee‟s contentions and proceeded to compute disallowance of ₹ 1,51,10,827/- under Rule 8D of the Rules. 6.2 On appeal before the ld. CIT(A), the assessee reiterated the submissions put forth before the AO that .....

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balance of investments under Rule 8D(2)(iii) of the Rules, the AO has wrongly included the investments made by the assessee in foreign companies, debentures, income from which is exigible to tax and application money for share allotment amounting to ₹ 6,74,30,675/-, the ld. CIT(A) held that the assessee‟s claims were correct as only those investments, the income of which is exempt are to be considered for computing the said disallowance under Rule 8D(2)(iii) of the Rules and directe .....

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view of the following judicial pronouncements :- i) HDFC Bank Ltd. in ITA No. 330 of 2012 dt. 23.7.2014 (Bombay High Court) ii) Centrum Direct Ltd. in ITA No. 5595/Mum/2011 dt. 15.10.2015 for Asst. Year 2008-09 6.4 Per contra, the ld. DR strongly relied on the impugned order of the ld. CIT(A) on the above issues. 6.5.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial pronouncements cited. It is seen from the details placed b .....

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wn the proposition that, if the assessee‟s capital, profits, reserves and surplus and current account deposits are higher than the investments in tax free securities, then it would be presumed that the investments made by the assessee would be out of interest free funds available with the assessee. This decision of the Hon‟ble Bombay High Court (supra) has been followed by a co-ordinate bench of this Tribunal in the case of Centrum Direct Ltd. in ITA No. 5595/Mum/2011 dt. 15.10.2015. .....

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his regard to re-compute the same by excluding from the opening and closing balances of investments for calculating the average investment, those investments in shares of foreign companies, debentures etc. whose income is exigible to tax and application money for allotment of shares amounting to ₹ 6,74,30,675/- after due verification. 7. In view of our finding (supra) in respect of ground no. 2 of the assessee‟s appeal, there is no requirement for us to adjudicate the alternate groun .....

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tion money from the calculation of disallowance u/s 14A r.w.s. 8D overlooking the fact that there investment relate to income not chargeable to tax and were correctly included by the AO in the calculation. 3. For these and other grounds that may be urged at the time of hearing, the decision of the CIT(A) may be set aside and that of the AO restored. 10. The grounds at sr. nos. 1 and 3 of revenue‟s appeal are general in nature and therefore no adjudication is called for thereon. 11. Ground .....

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