TMI Blog2016 (8) TMI 411X X X X Extracts X X X X X X X X Extracts X X X X ..... :- 4-8-2016 - Shri Rajendra, Accountant Member And Ramlal Negi Judicial Member Revenue by : Shri Vivek Perampurna-DR Assessee by : Shri Anuj Kishnadwala-AR ORDER Per Rajendra, AM Challenging the order dt. 29. 08. 2014 of the CIT(A)-2, Mumbai, Assessing Officer (AO) and the assessee have filed cross appeals for the year under consideration. Assessee-company, engaged in the business of manufacturing and export of textile and other goods, filed its return of income on 14. 10. 2010, declaring total income of ₹ 7. 18 crores. The AO finalised the assessment, u/s. 143(3)of the Act, on 26. 03. 2013, determining the income of the assessee at ₹ 16. 97 crores. ITA/7102/Mum/2014 : 2. Effective ground of appeal, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus, he partly allowed the appeal filed by the assessee. 4. Before us, the Authorised Representative (AR)argued that the Tribunal had held that the assessee had sufficient own funds for making investment, that the Hon ble High Court had also endorsed the above view of the Tribunal, that there was no justification for not admitting the additional claim by the FAA especially after the judgment of the Hon ble Bombay High Court delivered in the case of Pruthvi Brokers and Shareholders P. Ltd. (349ITR336), that in the earlier years the then FAA had allowed the appeal filed by the assessee holding that it had sufficient own fund for making investment and the Tribunal had dismissed the appeal filed by the AO in that regard. Therefore, in our op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. 33 Lacs. Following the decision of the Hon ble Bombay High Court in the case of Reliance Utilities (313ITR340), he held that it could not be said that the interest expenditure was incurred by assessee on the borrowed funds which were used for earning of exempt dividend income when the sufficient interest free funds are available with the company. Referring to the orders of the Tribunal delivered in assessee s own case for A. Yrs. 2006-07 2007-08, he directed the AO to delete the addition made. 2. 2. Before us, Departmental Representative (DR)supported the order of the AO. Authorised Representative (AR)submitted that expenditure was incurred by the assessee for earning tax free income, that in its computation of income, a sum of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier years Tribunal had restricted the disallowance to the 5% of dividend income earned. 2. 3. We have heard the rival submissions and perused the material before us. We find that in the AY. 2006-07 FAA had upheld the disallowance made by the AO u/s. 14A r. w. 8D of the Income-tax Rules, 1962(Rules). Deciding the matter in favour of the assessee, Tribunal vide its order 21. 11. 2011( ITA/4751/M/2010)has held as under : 7. We have considered the rival submissions and perused the relevant material on record. As demonstrated by the learned counsel for the assessee from the balance sheet of the assessee company on 31st, March, 2006, shareholders fund in the form of share capital and reserve and surplus aggregating to ₹ 71 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of business was in relation to earning of exempt dividend income, so as to warrant any disallowance on account of interest expenditure u/s. 14A. The decision of the Tribunal in the case of Shoppers Stop Ltd. (supra) cited by the 1earned counsel for the assessee fully supports our view wherein it was held that the assessee having sufficient own funds to cover up investments made in shares and securities, no disallowance u/s. 14A on account of interest expenditure was warranted. It is also observed that the AO himself did not make disallowance u/s l4A on account of interest expenditure in assessee s own case for assessment year 2005-06 in the assessment completed u/s 143(3) vide an order dated 20-12-2007 holding that the assessee having suf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case under appeal are similar to the facts of earlier two AYs. From the order of the FAA, it is clear that the assessee had more funds at its disposal, in form of share capital and reserves, than the investment made during the year. Therefore, respectfully, following the orders of the Tribuanl, for the earlier years, we confirm the order of the FAA for the interest expenses. As far as administrative expenses are concerned;following the order of the Tribunal for the earlier years;we direct the AO to restrict the same to 5% of dividend income. Grounds of appeal taken by the AO are allowed, in part. Respectfully following the above orders we are reversing the order of the FAA with regard to interest expenditure. 5. The assessee argue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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