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TMI Blog2018 (8) TMI 572X X X X Extracts X X X X X X X X Extracts X X X X ..... in deleting disallowance of interest pertaining to building under construction, ignoring that the funds utilized by the assessee are mixed funds and therefore interest is liable to be disallowed under proviso to section 36(1)(iii). 3. Whether on the facts and circumstances of the case, the Ld.CIT(A) was right in law in restriction the disallowance under section 14A to Rs. 30,85,987/instead of Rs. 73,03,132/- computed as per provisions of Rules 8D(2)(ii) of the Income Tax Rules, 1962? 4. Whether on the facts and in the circumstances of the case, the Ld.CIT(A) is right in law in holding that for the purpose of computation of disallowance u/s 14A under Rule 8D, the netting off interest income out of interest expenditure is to be allowed to the assessee." 3. Ground Nos. 1 and 2 raised by the Revenue relate to disallowance of interest made under section 36(1)(iii) of the Income Tax Act, 1961 (in short 'the Act') amounting to Rs. 14,42,161 which was deleted by the CIT (Appeals). 4. Briefly stated, during assessment proceedings the Assessing Officer noted that the assessee had claimed financial expenses of Rs. 6.13 crores. He also noted that the assessee had invested in purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income of the year 4132.84 Lakhs Add Depreciation 1242.43 Lakhs Total 5375.27 Lakhs 8. Referring to the same the Ld. counsel for assessee stated that the assessee had own funds available to the extent of Rs. 53.75 crores which was more than the sufficient for making the investment in land during the year and, therefore, applying the proposition applied by the I.T.A.T. in the preceding years, no disallowance of interest on account of investment made in land during the year, was also warranted. With regard to the investment made in capital work in progress the Ld. counsel for assessee stated that the same was also covered by the decision of the I.T.A.T. in the preceding year wherein identical disallowance of interest made on account of investment in capital work in progress was also deleted upholding the order of the CIT(Appeals) that the same was not warranted since there was no findings by the Assessing Officer that the building being so constructed was not for business purpose and even if any disallowance was warranted the same could be made under the proviso to section 36(1)(iii) of the Act, wherein the same could have been done only by showing that the assessee had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the ITAT in earlier years giving part relief to the assessee . 12. Brief facts are that the assessee had shown investment of Rs. 45.93 crores, income from which did not/would not form part of the total income and at the same time claimed financial expenses of Rs. 6.13 crores. The Assessing Officer held that the expenses incurred in relation to these investments was required to be disallowed and accordingly worked out the disallowance under Rule 8D of the Income Tax Act, 1961 of Rs. 97,32,906/-. Before the Ld.CIT(Appeals) the assessee raised several contentions that disallowance of interest if any was to be made after netting off interest received, that interest paid on loans taken for specific purposes related to the business of the assessee was to be excluded and that in view of sufficiency of own funds no disallowance u/s 14A was warranted. The Ld.CIT(Appeals) found that the I.T.A.T. had decided identical issue in the case of the assessee in assessment years 2010-11 and 2011 12 in ITA No.687/Chd/2014 dt27.11.2015 & in assessment year 2008-09, giving part relief to the assessee. He accordingly directed the Assessing Officer to rework the disallowance in accordance with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee against the interest paid during the year for the purpose of calculating the interest disallowable u/s 14A of the Act. The assessee has raised the following grounds before us: "1. That the learned CIT (A) - II, Ludhiana, has erred in sustaining a disallowance of Rs. 40,19,112/- u/s 14A / Rule 8D(2)(ii) of the Income Tax Rules. 2. That the learned CIT(A) is in complete defiance of the order of the Tribunal for the A.Y. 2010-11 & 201112 wherein the Hon'bje Tribunal had deleted the disallowance u/s 14A on the ground that after netting of interest nothing remained for making any disallowance on account of interest. 3. That the learned CIT(A) has ignored that the principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities and non-compliance leads to initiation of contempt proceedings. 4. That in any case the conformation of disallowance of Rs. 40,19,112/- is against the law and facts of the case and ignoring the submissions made by the appellant. 5. That the assessee craves for permission to add, amend or alter any cross-objection at the time of hearing." 19. Duri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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