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TMI Blog2019 (6) TMI 1291X X X X Extracts X X X X X X X X Extracts X X X X ..... taking up the appeal in ITA No.1611/Chd/2018. ITA No.1611/Chd/2018: 2. The sole ground raised by the Revenue relates to the assessee's claim of deduction u/s80P(2)(e) of the Act, of rental income earned by it from the letting out warehouses owned by it and the same reads as under: "1. Whether on the facts and circumstances of the case the Ld. CIT(A)has erred in allowing the appeal of the assessee and delete the addition of Rs. 8,69,01,552/- u/s 80P(2)(e) which is not correct because the same is not allowable to the assessee in the A. Y. 2012-13." 3. At the outset it was pointed out that this was the second round before the ITAT, with the I TAT having restored the issue to the CIT( A) in the first round to decide it in accordance with law after considering the evidences filed by the assessee with respect to its claim of deduction. 4. Before the Ld.CIT(A) detailed submissions were filed by the assessee contending that the Hon'ble Jurisdictional High Court in the case of the assessee itself had held that the rental income earned from letting out of warehouses to outsiders was eligible for deduction u/s 80P(2)(e) of the Act, while the warehouse income relating to storage and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elf. The fact of the appellant having supplied the evidence of having on rental income was mentioned in the impugned order itself as below: "8.1 During the appellate proceedings, the counsel for the appellant submitted that the appellant during the year under consideration received income on account of renting of its godowns for the purpose of storage, processing and facilitating the marketing of agricultural commodities. Deduction claimed u/s 80P(2)(e) has been disallowed by the AO relying upon the ratio laid down by the Hon'ble Punjab and Haryana High Court in the appellant's own case in ITA No. 157, 159, 664 of 2005, 477 of 2006, 419 of 2007, 275 of 2009 and 246, 251 of 2010. The appellant further submitted that the deduction in respect of the income derived by the appellant by way of renting of godowns for the purpose of storage, processing and acilitating the marketing of agricultural commodities has been specifically held to be admissible u/s 80P(2)(e). In the present case, the appellant had let out some of its godowns where from rent was received. Documentary evidence in support of letting out of godowns on rent had been furnished by the appellant during the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... using Corporation, etc. The appellant has excluded proportionate expenditure incurred in relation to this rental income. Accordingly, the profit on rental income after excluding the proportionate expenditure of Rs. 26.28 crores has been computed and claimed for working out eligible deduction. On perusal of details of such calculation where the deduction has been claimed only on account of rental income excluding the income received on account of storage charges, I find that the appellant has rightly claimed the eligible deduction of Rs. 8,69,01,552/- u/s 80P(2)(e). On similar facts, in the appellant's case for the A.Y.2013-14 the CIT(Appeals) had allowed deduction claimed u/s 80P(2)(e) vide his order dated 30.09.2016 which has been upheld by the Hon'ble Tribunal/In the light of the above facts and circumstances, I hold that the AO was not justified in making disallowance of the deduction claimed on account of rental income and the same is ordered to be deleted." 5. Aggrieved by the same, the Revenue has come up in appeal before us. 6. At the outset itself Ld.Counsel for the assessee pointed out that the ITAT had held deduction u/s 80P(2)(e) allowable on the rental income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso. Following the same we dismiss this ground raised by the Revenue. 10. Ground Nos.2 and 3 raised by the Revenue relate to the same issue of disallowance of interest expenses and administrative expenses incurred in relation to the dividend and interest income earned by the assessee which were eligible for deduction u/s 80P(2)(d) of the Act and the same read as under: "2. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was right in law in holding that the disallowance made on account of interest as per Rule 8d(2)(ii) of the Income Tax Rules, 1962 be deleted? 3. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was right in law in holding that the expenditure to be disallowed as per Rule 8D(2)(ii) of the Income Tax Rules, 1962 is to be calculated by taking into consideration only those investment which have earned income during the year in completed disregard to CBDT Circular No. 5/2014 dated 11.02.2014, which clarifies that Rule 8D read with section 14A of the Act provides for disallowance of the expenditure even where tax payer in a particular year has not earned any exempt income?" 11. Brief facts relating to the issue are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l is whether disallowance u/s 14A r.w.r. 8D is called for in the case of the appellant claiming deduction under section 80(P)(2)(d) of the Act, and if so how the said disallowance is to be worked out as per provisions of rule 8D of the income Tax rules. I find that the provisions of section 14A of the Act are attracted in the case of the appellant as it falls on all fours on the judgment of Hon'ble jurisdictional High Court of Punjab & Haryana in the case of Punjab State Cooperative Milk Producers Federation Ltd. Vs. CIT [2016] 67 taxmann.com 27 where the Hon'ble High Court held that provisions of section 14A are applicable even to income claimed as deduction u/s 80P(2)(d) of the Act. Moreover, the applicability of section 14A r.w.r. 8D has been upheld in the case of the assessee by the tribunal in the preceding years. The relevant part of the order of the honourable tribunal in ITA No.48/chd/2016 for the A.Y.2012-13 as below: "9. On the first contention raised by the assessee that section 14A r.w.r. 8D is not applicable while working out the claim of deduction u/s 80P(2)(d), we find that the Ld. DR has rightly pointed out that the issue has already been dealt with by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e quantum of share capital and reserves available with the assessee over the years as reflected in the financial statement of the assessee, the presumption ought to be that the investments had been made out of these interest-free funds available, we are in agreement with the learned counsel for assessee/The fact that the assessee had enough own funds to make the impugned investment had not been controverted by the learned DR and the same stands reflected in the Balance Sheet of the assessee right from financial year ending 31.03.91 to the impugned financial year ending on 31.03.12, which have been filed before us in the form of paper book. Moreover, the honourable jurisdictional High Court has held in the case of CIT vs M/s Max India Ltd. in ITA No.210/chd/2013 dated 08.03.2017 that if an assessee establishes that its interest-free funds were equal to or more than the interest-bearing funds it would be open to it to contend that presumption arises that the expenditure for earning interest income was incurred from out of its interest-free funds warranting no disallowance of interest expenditure u/s 14A r.w.r. 8D. The relevant findings of the honourable High Court are as under: "9. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year, we find merit in this contention of learned counsel for assessee. The special bench of the ITAT in the case ofACIT vs. Vireet Investments Private Limited in ITA No.502/del/2012 dated 16.06.2017 has laid down the said proposition and even the Hon'ble Delhi High Court in the case ofACB India Ltd. vs ACIT in ITA No.615/2014 dated 24.03.2015 has held so holding as under: "4. The AO, instead of adopting the average value of investment of which income is not part of the total income i. e. the value of tax-exempt investment, chose to factor in the total investment itself. Even though the CIT(Appeals) noticed the exact value of the investment which yielded taxable income, he did not correct the error but chose to. apply his own equity. Given (he record thai had to be done so to substitute the figure of 38,61,09,2877- with the figure of 3,53,26,800/- and thereafter arrive at the exact disallowance of 0.5%." 14. In view of the above, we direct that the expenses to be disallowed under rule 8D(2)(iii) be calculated by taking into account only those investments which have earned income during the year. 15.. In view of the above we hold that section 14A r.w.r. 8D is applicable f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, dismissed. In effect the appeal of the Revenue is dismissed. ITA No.1613/Chd/2018: 16. Ground No.1 raised by the Revenue reads as under: "1. Whether on the facts and circumstances of the case the Ld. CIT(A)has erred in allowing the appeal of the assessee and delete the addition of Rs. 663,26,502/- u/s 80P(2)(e) which is not correct because the same is not allowable to the assessee in the A. Y. 2015-16." 17. It was common ground between the parties that the ground No.1 raised in this appeal is similar to ground No.1 raised in I TA No.1611/Chd/2018.Our decision rendered therein at para 8 will apply mutatis mutandis to this ground also following which we dismiss the ground raised by the Revenue. 18. Ground Nos.2 and 3 raised by the Revenue read as under: "2. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was right in law in holding that the disallowance made on account of interest as per Rule 8d(2)(ii) of the Income Tax Rules, 1962 be deleted? 3. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was right in law in holding that the expenditure to be disallowed as per Rule 8D(2)(ii) of the Income Tax Rules, 1962 is t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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