TMI Blog2016 (7) TMI 1041X X X X Extracts X X X X X X X X Extracts X X X X ..... interest u/s 14A of the Act can be made in the present case. As far as the issue of net interest for the purpose of disallowance u/s.14A is concerned, we find that the Coordinate Bench of Tribunal in the case of Safar Reality Pvt.Ltd. vs. ACIT (2013 (11) TMI 1588 - ITAT AHMEDABAD) has approved the theory of netting off of interest income with interest expenditure. Considering the totality of the aforesaid facts, we are of the view that in the present case, no disallowance u/s.14A is called for and thus direct the deletion of addition made by the AO. Thus, the ground(s) of assessee are allowed. As far as the appeal of Revenue for AY 2009-10 is concerned, since in AYs 2008-09 & 2009-10 the ground of assessee is decided in assessee’s favour, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re as under: 2.2. Assessee is a company stated to engaged in the business of construction and land development. Assessee electronically filed its return of income for AY 2009-10 on 25.9.2008 declaring total income of ₹ 44,76,490/-. The case was selected for scrutiny and thereafter assessment was framed u/s 143(3) of the I.T. Act, 1961 vide order dated 08/11/2010 and the total income was determined at ₹ 75,55,030/-. Aggrieved by the order of AO, assessee carried the matter in appeal before ld.CIT(A) who vide order dated 02/03/2012 (in Appeal No.CIT(A)-XI/204/DCIT Cir.5/10-11 AY 2008-09) dismissed the appeal of the assessee. Aggrieved by the order of ld.CIT(A), assessee is now in appeal before us and has raised the following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the circumstances of the case, the CIT(A) erred in confirming disallowance addition of ₹ 71,29,024 to book profit u/s.115JB. 2.3. Ground raised by the Revenue in ITA No.1455/Ahd/2012 for AY 2009-10 reads as under: 1) The Ld.Commissioner of Income-tax(A) has erred in law and on facts in directing the Assessing Officer not to make adjustment of disallowance of ₹ 71,29,024/- u/s.14A of the Act, while computing MAT profits u/s.115JB of the Act. 2.4. Before us, ld.AR Submitted that the solitary issue in all the years is with respect to disallowance u/s 14A of the Act. 2.4. During the course of assessment proceedings, Assessing Officer (AO) noticed that assessee has earned exempt income u/s 10(34) and 10(35) aggr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such disallowance and the schemes are prescribed under rule 8D of Income-tax Rules, 1962. It is clearly held by the Mumbai High Court in the case of Godrej Boyce Mfg.Co.328 ITR 81 that provisions of rule 8D are applicable from A.Y. 2008-09 on wards. This way, provisions of rule 8D will be applicable in the year under consideration i.e. from A.Y. 2008-09. The A.O had scrupulously followed provisions of rule 8D while making the disallowance against interest expenditure and administrative expenditure. 3.4. The appellant had placed reliance on the case of Reliance Utilities and Power Ltd. 313 ITR 340(Mum.). In my considered view, ratio of this case will not be applicable in the instant case, since appellant s case is squarely covered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extent of ₹ 27.89 crores and therefore since interest-free funds were more than the investments, the presumption was that the investments are out of interest-free funds and for this proposition he placed reliance on the decision of Hon ble Bombay High Court in the case of CIT vs. Reliance Utilities Power Ltd. reported at 313 ITR 340 (Bom.) and the decision of ITAT order of Ahmedabad Tribunal in the case of Hipolin Ltd. vs. ACIT (ITA No. 4259/Ahd/2007). With respect to disallowance of interest expenditure, he submitted that as against the interest expenses of ₹ 51,00,731/-, assessee has earned interest income of ₹ 50,58,840/- and therefore the net interest expenses is only to the extent of ₹ 41,891/- and in such a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder dated 30/10/2015. He thus submitted that the AO has rightly worked out the disallowance. 4. We have heard the rival submissions and perused the material on record. The issue in the present case is with respect to disallowance of expenses u/s.14A of the Act. The undisputed fact is the assessee has earned tax free amounting to ₹ 58,41,551/- and has also incurred interest expenses. It is assessee s submission that it has interest-free funds which are more than the amounts invested from which it has earned exempt income and in such a case the presumption is that investments are out of interest-free funds and, therefore, no disallowance on account of interest can be made. This submission of the assessee has not been controverted by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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