TMI Blog2017 (11) TMI 1235X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Ravish Sood, JM For The Appellant : Shri Ronak Doshi For The Respondent : Ms.Arju Garodia ORDER Per Shamim Yahya, AM These are appeals by the assessee against respective orders of learned CIT(A) for the assessment years 2010-2011 and 2011-2012. 2. The grounds of appeal are common and the same read as under:- Assessment Year 2010-2011 : Ground I: Disallowance u/s 14A r.w. Rule 8D of the Income Tax Rules. 1962 ( the Rules' ) of ₹ 7,98,323/-: 1. On the facts and circumstances of the case and in law, the Commissioner of Income-tax (Appeals) - 14, Mumbai [ the CIT(A) ] erred in upholding the action of the Deputy Commissioner of Income, Range 6(1), Mumbai [ the AO ] in disallowing the expenditure amounting to ₹ 7,98,323/- u/s. 14A of the Act, being the expenses incurred towards earning exempt income, computed as per Rule 8D of the Rules. 2. The Appellant prays that disallowance of ₹ 7,98,323/- be deleted i.e. the same be restricted to ₹ 29,265/- as computed by the Appellant. Ground II: Lew of Interest 1. On the facts and circumstances of the case and in law, the Ld. AO erred in levying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant are the same as was in the last year. My Ld. Predecessor on the issue has interalia held as under; 6.14 I have considered the above submissions of the appellant and also the decisions cited in this regard. Subsection (1) of 14A of the act prescribes that no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of total income under the Act. Sub-section(2) prescribes that if the Assessing officer, having regard to the correctness of the claim of the assessee in respect of such expenditure is not satisfied, he shall determine the amount of expenditure incurred in relation to such income in accordance with the method as may be prescribed. Subsection (3) prescribes that the provisions of subsection (2) shall a/so apply in relation to a case where an assessee claims that no expenditure has been incurred by him in relation to income which does not form part of the total income. With effect from A.Y. 2008-09, rule 8D has been introduced, which lays down the method of computation of the expenditure in regard to exempt income for the purpose of disallowance under section 14A. 6.15 If one reads sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n shall be allowed in respect of expenditure incurred by the assessee in relation to such income. It has also been held that provisions of rule 8D of the IT. Rules, 1961 shall apply with effect from assessment year 2008-09. It is held by the High Court that the disallowance for the purpose of section 14A shall be computed a per rule 8D and the said rule is constitutionally valid. In view of this decision therefore, it is evident that the AO was justified in computing the disallowance under rule 8D in respect of the appellant s exempt income because the appellant had not made any disallowance suo-moto and claimed that absolutely no expenditure has been incurred in relation to the earning of exempt income. The decision of Hon'ble Bombay High Court is binding and tho AO has simply followed the same. Hence I have no choice than to reject the contention of the appellant. This is without prejudice to the decision of Hon'ble ITAT in the Appellant's own case in the A.Y. 2004-05, A.Y. 2005-06 and A.Y. 2006-07, which are not governed by Rule 8D as it is applicable only w.e.f. A.Y. 2008-09. The Hon ble High Court has held as under, in this regard: 6.17 Hence, without prejudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee summarized his submissions as under:- Gr. No. Particulars Amount ( in Rs.) A.O. CIT(A) Assessee / Appellant relies on In favour of Para Pg. Para Pg. 1. Disallowance u/s 14A of the Income tax Act, 1961 ( the Act ) r.w.r. 8D(2)(ii) of the Incometax Rules, 1962 b( the Rules ) 600,303 5.6 11- 12 3.11 3.12 6-8 Upto March 31, 2006 Hon'ble Tribunal has given a factual finding that the tax-free investments Mere out of o n funds and not out of borrowed funds and hence, no expenses can be said to have been incurred for the purpose of acquiring the said investments. Reliance is placed on the following orders of IT AT in Appellant's own case : In the Appellant's own case for A.Y. 1999-00 (ITA No. 6017/Mum/2003) In the Appellant's own case for A.Y. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iture must have actually been incurred for the purpose of earning exempt income. Maxopp Investments Ltd. v. CIT (203 Taxman 364) (Del HC) CIT v. Hero Cycle Ld. (323 ITR 518) (P H) CIT v. UTI Bank Ltd. (215 Taxman 8) (Guj.) ACIT v. SIL Investments (73 DTR 233) (Del-T) 8. The learned Counsel of the assessee further submitted that in view of the decisions as above, the issue in this appeal should be referred to the Assessing Officer for fresh consideration. He reiterated that assessee has sufficient interest-free funds and assessee has actually not incurred any expenditure to earn the exempt income. 9. Per contra, the learned Departmental Representative fairly agreed that the issue can be remitted to the file of the Assessing Officer. 10. We have carefully considered the submissions and perused the records. WE find ourselves in agreement with the proposition that if sufficient interest-free funds are available for making the investment in exempt income, disallowance u/s 14A is not justified. This proposition is duly supported by the decision of Hon ble jurisdictional High Court in the case of CIT v. Reliance Utility Power Limited (313 ITR 340) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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