TMI Blog2018 (5) TMI 752X X X X Extracts X X X X X X X X Extracts X X X X ..... Disallowance u/s 14A - suo moto disallowance by assessee - Held that:- Referring to Article 265 of the Constitution of India which clearly mandate that the taxes are not to be imposed save by authority of law and no taxes shall be levied or collected except by authority of law. Thus keeping in view mandate of article 265 of the Constitution of India read with factual matrix of the case and the case laws as discussed by us in our conclusions, we hold that disallowance u/s. 14A in the instant case before us cannot exceed a sum of ₹ 2,800/- and hence we restrict disallowance u/s. 14A to ₹ 2,800/- not withstanding that the assessee voluntarily suo-motu disallowed a sum of ₹ 3,94,886/- u/s 14A r.w.r. 8D in its return of income filed with the Revenue. We allow additional ground of appeal raised by the assessee. The assessee succeeds in this additional ground. - I.T.A. No.6259/Mum/2016 - - - Dated:- 9-5-2018 - SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For The Assessee : Shri Firoze Andhyarujina For The Revenue : Shri V. Vidhyadhar (Sr. DR) ORDER PER RAMIT KOCHAR, Accountant Member This appeal, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ancillary parts. During the course of assessment proceedings u/s. 143(3) r.w.s 143(2), the AO observed that the assessee has received rental income to the tune of ₹ 57,83,250/- and after claiming deduction u/s. 24(a) of 30% towards repairs and maintenance, an amount of ₹ 40,48,275/- was offered by the assessee for taxation under the head Income from House Property in the return of income filed with the Revenue. The AO observed that the assessee has claimed depreciation of ₹ 17,76,230/- on the same property which was let-out, which claim of the assessee was disallowed by the AO vide assessment order dated 23.03.2015 passed by the AO u/s 143(3). 4. Aggrieved by the assessment order dated 23.03.2015 passed by the AO u/s 143(3), the assessee filed first appeal before learned CIT(A). The assessee submitted before learned CIT(A) that assessee is engaged in the manufacture of auto ancillary parts. The assessee submitted that it has two factories one at Bhandup and another at Daman. The factory at Bandup had two building structures which are classified as an existing and new building. It was submitted that is only part of the existing building structure which was let ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icence agreement along with building plans were filed before the learned CIT(A) albeit as an additional evidences. It was submitted that leave licence agreements were also filed before the AO and learned CIT(A), while building plans were filed before the learned CIT(A) for the first time as an additional document/evidences. The learned CIT(A) has not called for the remand report with respect to the additional evidences filed before the learned CIT(A) for the first time which consisted of building plans and rather gave finding that no evidences were filed and only bald statements were made by the assessee. 6. The Ld. DR on the other hand submitted that finding is given by learned CIT(A) that no evidences has been filed by the assessee and only bald statements were made before the CIT(A) which was not supported by any evidences on record. In any case it was submitted that building plans are stated to filed for the first time before the learned CIT(A) as an additional evidences(if at all they were filed) and hence it was incumbent on learned CIT(A) to have forwarded these additional evidences to AO for remand report as mandated u/r 46A of the 1962 Rules which was not done by lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r hand has given contrary finding that no evidences were filed before him and only bald statements were made. The claim of the assessee is that the said area of 701 Sq Mtrs which is let-out is out of the area of 2528.05 Sq. Meters situated in the existing building. The assessee claim is that the balance area of existing building and also the entire new building situated at Bhandup is in its possession of the assessee which is used for its business purposes. Thus it is claimed by the assessee that only the proportionate disallowance of depreciation of building consisting of existing structure to the tune of 27.455% which was let-out can be disallowed as that proportion of income from letting out of the said area is offered for taxation under the head income of hence property and there is no provision in the 1961 Act to claim depreciation on the said income from house property but the rest of depreciation on existing building and the entire depreciation on new building is to be allowed to the assessee as the same were used for its business. However deduction on account of repair and maintenance to the tune of 30% u/s. 24(a) is already claimed by the assessee so far as rental income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvoking Rule 8D of the 1962 Rule and made following disallowances:- 8D(2) (i) The amount of expenditure directly relating to income which does not form part of total income NIL 8D(2) (ii) A Amount of Interest paid 31,12,542 B Average value of the Investment 1,83,62,000 C Average value of the Total Assets 16,25,64,477 A x B 3,51,568 C 8D(2) (iii) 0.5% of the Average value of the Investment of ₹ 1,83,62,000/- 91,810 Aggregate of total amount as per clause 8(2)(i), 8(2)(ii), 8(2)(iii) 4,43,378 Already disallowed by assessee u/s 14A of the Act 3,94,886 The assessee had voluntarily disallowed ₹ 3,9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the facts and in the circumstances of the case and in law the disallowance under Rule 8D was required to be restricted to ₹ 2,800/-. The receipt of Dividend from share from Bank of India during the year was only ₹ 2,800/- as against which the disallowance by applying rule 8D was of ₹ 3,94,886/- which was further enhanced by ₹ 48,492/- during the assessment. As against the actual receipt of dividend of ₹ 2,800/- the disallowance was of ₹ 4,43,378/-. It is settled legal position that disallowance under Rule 8D cannot exceed the dividend recieved. It is therefore submitted that the addition under Rule 8D be restricted to ₹ 2,800/-. The learned DR fairly stated that this is a legal grounds and facts are emerging from records. The learned DR left to the Bench to decide as to the admission of this ground raised as an additional ground of appeal. After hearing both the parties and in the interest of justice, we direct admission of the additional ground filed by the assessee before the tribunal keeping in view decision of Hon ble Supreme Court in the case of (1998) NTPC Limited v.CIT reported in 229 ITR 383(SC). We order accordingly. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of disallowance as was worked by the assessee u/s 14A r.w.r. 8D read as under : GOLDSEAL ENGINEERING PRODUCTS PRIVATE LTD. Asst. Year 2012/2013 Statement of disallowance u/s 14 A of the I.T. Act read with Rule 8D of the I.T Rules A Interest ₹ 2,692,777/- B Average value of investments capable of yielding exempt income As on 31/03/2011 ₹ 17,162,000 As on 31/03/2012 ₹ 19,462,000 Total ₹ 36,624,000 50% of above ₹ 18,312,000/- C Average value of total assets As on 31/03/2011 ₹ 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... funds were used by the assessee but no co-relation of the interest bearing loans raised with the investments made in the securities capable of yielding exempt income was brought on record. We have also observed from the Balance sheet which is filed by the assessee and which is placed in paper book at page no. 14 that the assessee s own funds(interest-free) of share capital and reserves were to the tune ₹ 13.06 crores while the investments in securities which are capable of yielding exempt income are to the tune of 1.97 crores, thus own funds available with the assessee are higher than the investments in securities and presumption will apply that the assessee invested its own interest free funds for making investment in securities and hence no disallowance can be made towards interest expenses u/r 8D(2)(ii) of the 1962 Rules unless the presumption is rebutted by Revenue which has not been done in this case. Reliance is placed on the decision of Hon ble Bombay High Court in the case of Reliance Utilities and Power Ltd.(supra) as well as decision of Hon ble Bombay High Court in the case of HDFC Bank Ltd. (supra). Reference is also drawn to the decision of Hon ble Gujarat High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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