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TMI Blog2019 (10) TMI 703X X X X Extracts X X X X X X X X Extracts X X X X ..... essee has raised the following two grounds: - "1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the action of the AO in making disallowance of Rs. 28,20,000/- being 0.5% of average investment, under section 14A of the Act read with Rule 8D(2)(iii) towards administrative and other expenditure. 2. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not appreciating the fact that it was only by virtue of investments in the securities held as stock-in-trade that the dividend had accrued to your Appellant and it was settled law that provisions of section 14A & Rule 8D were not applicable to such case." 3. The Revenue has raised the grounds against the deletion of addition being interest expenditure under Rule 8D(2)(ii). For this Revenue has raised the following ground No. 2 and 3: - "2. Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in relying on Hon'ble Bombay High Court judgement of HDFC Bank Ltd. 366 ITR 505 which is about disallowance under section 14A prior to Rule 8D and in instant case AO has correctly applied Rule 8D, hence the said judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance of expenses relatable to exempt income under section 14A of the Act read with Rule 8D(2)(iii) of the Rules, being administrative expenses, we remand this issue back to the file of the AO, who will examine the facts of the case and will disallow the expenses relatable to exempt income by computing 0.5% of average value of investment under Rule 8D(2)(iii) of the Rules, only qua the investments which give exempt income. The AO will restrict the disallowance to that extent only. The issue of the assessee's appeal is restored back to the file of the AO. 6. The next issue in this appeal of Revenue is against the order of CIT(A) deleting the addition made on account of interest income on accrual basis instead of due basis. For this Revenue has raised the following ground No. 1: - "1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 86,25,94,874/- made by the AO on account of interest income on accrual basis instead of due basis. 7. At the outset, we noted that AO in the assessment order noted the fact that the assessee has credited interest to the profit and loss account by an amount of Rs. 1282,49,7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO. For this Revenue has raised the following ground No. 4: - 4. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs. 29,32,55,778/- on account of broken period interest which was treated as capital expenditure by the AO in view of the decision of the Supreme Court in the case of Vijaya Bank." 10. Briefly stated facts are that the AO noted in the assessment order that broken period interest paid by the assessee is nothing but part of the price paid for the securities for acquiring shares. He noted that whatever be the reason that prompted the assessee to purchase the securities, the price paid for the same is in the nature of capital outlay only and no part of it can be said of as expenditure against interest accruing on these securities. Hence, the AO required the assessee to explain as to why the same should not be disallowed i.e. broken period interest. The assessee made claim of deduction of Rs. 15,36,24,791/- being amount of broken period interest out of the disallowance for assessment year 2012-13 in the case of securities sold during that year. The AO noted that the assessee is not entitled for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Y.2012-13 respectively Respectfully following the above decisions, it is held that the broken period interest paid by the appellant is allowable as deduction. Accordingly, addition of Rs. 29,32,55,778/- made by the AO on account of broken period interest is deleted and appeal of the assessee in respect of Ground No.6 is allowed. 9.7 Ground No.7 is in respect of not allowing deduction of Rs. 15,36,24,791/-being broken period interest disallowed in A.Y.2012-13. In this regard, it is stated that the issue of broken period interest has been set aside by the ITAT in the Banks own case for A.Y 2010-11 vide order bearing ITA No.3591/M/2014 to the file of the AO with the direction to follow the Bombay High Court decision in case of HDFC Bank Ltd. For the sake of ready reference, the relevant portion of Hon'ble ITAT's order is reproduced as under: "Referring to Ground no. 5, LA Counsel for the assessee submitted that the same relates to the broken period interest debited to the Profit & Loss Account and the same is required to be adjudicated in view of the judgment of the Hon'ble jurisdiction High Court in the case of GT vs. HDFC Bank Ltd in Income Tax Appeal No.330 of 2012, dat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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