TMI Blog2014 (2) TMI 1264X X X X Extracts X X X X X X X X Extracts X X X X ..... ial Member. Revenue by : Shri Maurya Pratap Assessee by : Shri Vijay Mehta ORDER: Challenging the order dt.06.07.2012 of the CIT(A)-2, Mumbai, Assessing Officer (AO) has raised following Grounds of Appeal: 1. Whether on the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the AO to delete the addition holding that the assessee company has itself disallowed expenditure of ₹ 7,89,633/- for earning exempt dividend in its computation of total income. 2. The learned CIT(A) has further erred in overlooking the fact that the disallowance made u/s. 14A r.w.r. 8D of ₹ 2,21,83,000/- has been correctly computed by the AO relying on the guidelines issued by the Bombay Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee was having its own interest free funds to the extent of ₹ 7962.05 Lacs, that the investment made by it was of ₹ 6774.33 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. Authorized Representative(AR)submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ite unreasonable, that the dividend income earned by the assessee was only ₹ 12,17, 147/-, that in the 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 31 st , March, 2006 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat interest expenditure incurred by it on borrowed funds which were utilized for the purpose 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o (ITA/7697/ Mum/2010-dated 27.06.2012). We find that facts of the 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 Tribunal, 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. As a result, appeal filed by the AO stands partly allowed. - - TaxT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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