TMI Blog2016 (5) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... out of the interest paid, under rule 8D(2)(ii) of the Rules. However, so far as the AO’s computation of expenditure to be disallowed under rule 8D(2)(iii) is concerned, the same in our view is in conformity with the rules, hence, the same do not call for any interference. Accordingly, the ground of the assessee is partly allowed. - ITA No. 5062/Del/2011 - - - Dated:- 22-3-2016 - MEMBER For The Appellant : Ms. Charu Goyal, CA For The Respondent : Sh. P. DAM Kanunjana, Sr. DR ORDER PER O.P. KANT, A.M.: This appeal of the assessee is directed against order dated 13/07/2011 of the Commissioner of income tax (Appeals)-XVI, New Delhi for assessment year 2008-09 raising following grounds: 1. That the CIT appeals ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support of its claim, the assessee cited number of cases before the Ld. Commissioner of Income-tax (Appeal). The Ld. Commissioner of Income-tax(Appeals), however, relying on the decision of the Tribunal, Mumbai bench in the case of M/s Daga Capital Management Private Limited 312 ITR 1 and judgment of the Hon ble High Court of Calcutta in the case of M/s Dhanuka and sons v/s CIT Central-1 in ITA No. 633 of 2004, confirmed the disallowance made by the AO under section 14A of the Act. Aggrieved, the assessee in appeal before the Tribunal. 3. The only effective ground of appeal is in respect of disallowance of ₹ 13,91,082/-under section 14A of the Act. 4.1 Before us, the Ld. Authorized Representative of the assessee filed a paper b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ario to assume that interest expenditure must have been incurred to raise funds for investment is unfair. (iv) The assessee company is a profit-making entity and had sufficient reserve and surplus during the years in which investment was made. Therefore to conclude that same were done out of interestbearing funds is unfair. That the assessee company had a reserve and surplus to the tune of ₹ 18,60,41,748/- as on 31/03/2008 whereas total investments were of the value of ₹ 3,65,32,450/-. (v) Relied on the judgment dated 04/02/2014 of the Hon ble Gujarat High Court in the case of CIT versus Torrent Power Ltd in appeal No. 603 of 2013 wherein it is held that no disallowance under section 14A could be made where assessee have s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has placed reliance on the judgment of Hon ble Allahabad High Court in the case of CIT v/s M/s Shivam motors Private Limited (supra), wherein it is held that in the absence of any tax-free income, the corresponding expenditure could not be worked out for disallowance. But the assessee has shown tax-free income of ₹ 9,03,478/- during the year under consideration, and therefore the ratio of the cited case is not applicable over the facts of the assessee. 5.3 We have observed that the Assessing Officer has made disallowance under rule 8D(2)(ii) and 8D(2)(iii) only. Under rule 8D(2)(ii) of the Rules, the disallowance is in respect of interest corresponding to the investment in exempt income earning assets. As the interest which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enditure, in the present case, was attributable to business in which the resultant income was assessable to tax, a disallowance could not be made. The Tribunal, consequently, deleted a disallowance to the extent of ₹ 66.79 lacs out of a total disallowance of ₹ 67.75 lacs made by the Assessing Officer under Section 14A, sustaining the balance of ₹ 0.96 lacs on account of other expenditure to the extent of 0.5 percent of the average value of investment. The order of the Tribunal in regard to the disallowance of ₹ 0.96 lacs has been confirmed by this Court by a judgment dated 1 September 2014 in an appeal (Income Tax Appeal No 131 of 2014 (Dhampur Sugar Mills Ltd, Bijnor Vs Commissioner of Income Tax, Bareilly)-) filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest-bearing funds were more than the investment in the tax-free securities. This factual position is not one that is disputed. In the present case, undisputedly the Assessee s capital, profit reserves, surplus and current account deposits were higher than the investment in the tax-free securities. In view of this factual position, as per the judgment of this court in the case of Reliance Utilities and Power Ltd (supra), it would have to be presumed that the investment made by the assessee would be out of interest free funds available with the assessee. We therefore, are unable to agree with the submission of Mr Suresh Kumar that the Tribunal had erred in dismissing the Appeal of the Revenue on this ground. We don t find that question (A) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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