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TMI Blog2017 (2) TMI 273X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 14A of the Act read with Rule 8D of the Income Tax Rules. 3. The assessee in the present case is a Company, which is engaged in the business of growing and manufacturing of tea, chemicals, fertilizers, tea trading, warehousing, development of real estate and educational activity. The return of income for the year under consideration was filed by it on 30.09.2009, which was revised on 28.03.2011, declaring finally total income of Rs. 2,12,22,360/-. In the said return, dividend income earned by the assessee was claimed to be exempt from tax and a disallowance of Rs. 30,57,783/- was offered under section 14A on account of expenditure incurred in relation to the earning of the said exempt income. Since the said disallowance offer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 11 crore as share holders fund. Therefore, the interest paid on borrowed fund was on account of business activity of the company and was not relatable to investment made by the company out of which the exempt income was earned. From the above facts and figures, your goodself can find that the assessee was having his own sufficient fund for making investment out of which the exempt income has been earned. In this connection, the reliance is placed on the judgement of Hon'ble Supreme Court in the case of CIT vs. Wal fort Share & Stock Brokers Pvt. Ltd. [326 ITR 1} and the recent judgement of the Hon'ble ITAT, Mumbaiin the case of Just ice Sam P. Bharucha vs. The Addl . Commissioner of Income Tax 11(3), Mumbaiin the [ITA 3889/Mum/2011] wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following reasons given in paragraphs no. 6 & 7 of its order:- "6. We have heard the rival submissions and perused the materials available on record. The fact s stated hereinabove remain undisputed and hence the same are not reiterated for the sake of brevity. Admittedly the disallowance u/s 14A to the tune of Rs. 92,89,825/- have been made by the ld. AO by invoking the provisions of Rule 8D(2)(ii) of the Rules. We find that the assessee company is having share capital of Rs. 10.67 crores and sufficient free reserves of Rs. 123.67 crores as on 31.3.2007 and Rs. 137.99 crores as on 31.3.2008, but whereas the total investments as on 1.4.2007 was Rs. 105.86 crores and as on 31.3.2008 was Rs. 94.68 crores. We find that the ld. CIT(A) had give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of fact given by the Tribunal was that the assessee's own funds and other non-interest bearing funds were more than the investment in the tax-free securities. This factual position was not one that was disputed. Undisputedly, the assessee's capital, prof it reserves, surplus and current account deposits were higher than the investment in the tax free securities. In view of this factual position, it would have to be presumed that the investment made by the assessee would be out of the interest free funds available with the assessee. 6.1. Similar views were expressed in the following decisions: - Woolcombers ofindia Ltd. -vs. - CIT reported in 134 ITR 219 (Cal .) East India Pharmaceuticals Works Ltd. -vs. - CIT reported in (1997) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8D or from 60% agricultural income after applying Rule 8D now stands resolved by the decision of the Hon'ble Supreme Court in the case of CIT -vs. - Apeejay Tea Co. Limited (Civil Appeal No. 1105 of 2006 dated August 06, 2015), wherein it was held that the deduction on account of cess paid has to be allowed while computing the income of the tea grown and manufactured under Rule 8D. Respectfully following the said decision of the Hon'ble Supreme Court, we uphold the impugned order of the ld. CIT(Appeals) giving relief to the assessee on this issue and dismiss Ground No. 2 of the Revenue's appeal .
8. In the result , the appeal of the Revenue is dismissed.
Order pronounced in the open Court on February 03, 2017. X X X X Extracts X X X X X X X X Extracts X X X X
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