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2016 (9) TMI 1205 - ITAT MUMBAI

2016 (9) TMI 1205 - ITAT MUMBAI - TM - Addition u/s 14A - Held that:- The Hon’ble Delhi High Court in the case of Joint Investment Private Limited (2015 (3) TMI 155 - DELHI HIGH COURT) has held that section 14 of the Act or rule 8D cannot be interpreted so as to mean that the entire tax exempt income of the assessee is to be disallowed. That the window for disallowance is indicated in Section 14A, and is only to the extent of disallowing expenditure incurred by the assessee in relation to the ta .....

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e. Considering the proposition of law laid down the disallowance in this case is restricted to the extent that is suo-moto offered by the assessee at ₹ 4,70,062/-. - In view of the above, the appeal of the assessee is treated as partly allowed - ITA Nos.26 & 27/M/2015, ITA Nos.18 & 19/M/2015 - Dated:- 19-8-2016 - SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER For The Assessee : Shri Jehangir Mistri, A.R. with Surendra Nijsure, A.R. For The Revenue : Shr .....

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come Tax Rules, 1962. 3. First we take up the appeal of assessee bearing ITA No.26 and cross appeal of the Revenue bearing ITA No.18/M/2015 relevant to A.Y. 2010-11. ITA No.26 & 18/M/2015 for A.Y. 2010-11 4. The brief facts of the case are that during the assessment proceedings the Assessing Officer (hereinafter referred to as the AO) noted that the assessee for the year under consideration had claimed tax exempt dividend income of ₹ 6,75,076/- and tax exempt long term capital gains of .....

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ance as per the provisions of section 14A read with rule 8D of the Income Tax Rules, 1962 of ₹ 2,65,36,592/-. However, since the assessee at its own had already disallowed a sum of ₹ 4,70,062/-, the AO made the addition of the remaining amount of ₹ 2,60,66,530/-. Being aggrieved by the above disallowance made by the AO, the assessee preferred appeal before the Ld. CIT(A). 5. It was pleaded before the Ld. CIT(A) that the investments were made by the assessee in its own subsidiar .....

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re no disallowance on account of interest expenditure was attracted. Further, a plea was also taken that the assessee during the year had also earned interest income and that for computation of interest expenditure, the netting of the interest income and interest expenditure should be done and net interest expenditure should be taken into consideration. 6. After considering the above submissions of the assessee, the Ld. CIT(A), while relying upon the decision of his predecessor in relation to ea .....

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nditure is to be taken into consideration for the purpose of computing the disallowance of interest expenditure under section 14A. 7. Being aggrieved by the above decision of the Ld. CIT(A), the assessee has come in appeal contending that since the own funds of the assessee were more than the investments made, hence as per the law laid down by the Hon ble Bombay High Court in the case of CIT vs. Reliance Utilities and Power Ltd. (supra), the presumption would be that the assessee had used its ow .....

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le applying rule 8D. Certain other grounds have also been taken regarding the disallowance of interest incurred on bank fees taken for trading in bonds, income from which was chargeable to income tax and regarding the disallowance of bank charges etc. 8. The Revenue, on the other hand, has come in appeal agitating the action of the Ld. CIT(A) in directing the AO to exclude the investments made in foreign companies and to consider the net interest expenditure for the purpose of computation of dis .....

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ugned order wherein the submissions of the assessee have been recorded by the Ld. CIT(A) and it has been mentioned that the own funds of the assessee as on 31.03.09 were at ₹ 1,99,30,02,119/- and as on 31.03.10 were at ₹ 2,03,79,45,490/-. The investments as stood on 31.03.09 were at ₹ 94,20,52,398/- and as on 31.03.10 were at ₹ 93,23,07,397/-. A perusal of the above, reveals that the own funds of the assessee at the end of the financial year have increased, whereas the in .....

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interest free funds were sufficient to meet the investment. Similar view has been taken in the case of CIT vs. HDFC Bank Ltd. in ITA No.330 of 2012 decided on 23rd July 2014 by the Hon ble Bombay High Court. In the light of the above cited decisions, even otherwise, no interest disallowance is attracted in relation to investments made by the assessee as the assessee had its own sufficient funds for the purpose of making investments. 10. Further, the Hon ble Delhi High Court in the case of Joint .....

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High Court in the case of Chem Investments vs. CIT (2015) 61 taxman.com 118 has held that section 14A will not apply if no exempt income is received or receivable during the relevant previous year and that the expression does not form part of the total income , in section 14A of the Act envisages that there should be an actual receipt of income which is not included in the total income during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the sa .....

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he assessee has claimed exempt dividend income of ₹ 6,75,076/- and exempt long term capital gain of ₹ 19,62,821/-. The AO, however, made a disallowance of ₹ 2,65,36,592/- in relation to expenditure incurred for earning of the above exempt income. The assessee itself has disallowed an amount of ₹ 4,70,062/- in its computation of income. Considering the proposition of law laid down by the various High Courts as discussed above, the disallowance in this case is restricted to .....

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