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TMI Blog2019 (12) TMI 676X X X X Extracts X X X X X X X X Extracts X X X X ..... sed under s.143(3) and 143(3) r.w.s.147 of the Income Tax Act, 1961(hereinafter referred to as "the Act") dated 10/03/2016 and 14/11/2017 relevant to Assessment Years (AYs) 2013-14 & 2012-13 respectively. Since both the appeals belong to same assessee, these were heard together and are being disposed of by this consolidated order for the sake of convenience and brevity. 2. First, we take up ITA No.1591/Ahd/2018 for the AY 2012-13, wherein the assessee has raised the following grounds of appeal: 1.1. The order passed u/s.250 on 27.08.2018 for A.Y. 2012-13 by CIT(A)-6, Abad upholding the disallowance of Rs. 3,07,303/- u/s.14A made by AO is wholly illegal, unlawful and against the principles of natural justice. 1.2. The Ld.CIT(A) has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re generating the exempted income. Therefore, the AO was of the view that the proportionate amount of interest expenses of Rs. 10,89,270/- incurred in relation to such exempted income needs to be disallowed. Accordingly, the AO worked out the amount of interest expenses corresponding to such exempted income in the manner as given below: "A. Amount of interest claimed Rs. 1089270/- B. Exempt Income Rs. 332287/- C. Total Income Rs. 1177830/- A+B+C = Rs. 1089270/- X Rs. 332287/- = Rs,.307303/- 1177830/- Therefore, Rs. 3,07,303/- (being proportionate expenses) is added in his return income." Aggrieved assessee preferred an appeal to the learned CIT(A) who has also confirmed the order of the AO. Being aggrieved by the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nerated or available with the company, if the interest-free funds were sufficient to meet the investments. In this case this presumption is established considering the finding of fact both by the CIT(A) and Tribunal". 7.1. Similarly, we also rely on the judgment of the Hon'ble Bombay High Court in the case of CIT vs. HDFC Bank Ltd reported in 366 ITR 505 (Bom). The relevant extract of the order is reproduced below:- "Where assessee's capital, profit reserves, surplus and current account deposits were higher than the investment in tax-free securities, it would have to be presumed that investment made by the Assessee would be out of the interest-free funds available with Assessee and no disallowance was warranted u/s 14A." 7.2. Sim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which yielded exempt share of profit so that the disallowance u/s.14A was justified. 2.2. That in the facts and circumstances of the case as well as in law, the Ld.CIT(A) ought not to have upheld the disallowance of Rs. 84,499/- u/s.14A made by AO. 3.1. Without prejudice to the above disallowance of Rs. 84,499/- u/s.14A made by AO is highly excessive and calls for reduction. It is, therefore, prayed that the disallowance of Rs. 84,499/- u/s.14A made by AO and upheld by the CIT(A) may kindly be deleted. 10. The only issue raised by the assessee is that the learned CIT (A) erred in confirming the disallowance of Rs. 84,499.00 under the provisions of section 14A of the Act r.w.r. 8D of Income Tax Rules, 1962. 11. The assessee in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 14A read with rule 8D of Income Tax Rules, 1962. 14.1. Regarding the interest expenses, we note that in the identical facts and circumstances the impugned issue has been decided in favour of the assessee in his own case vide paragraph number 7 to 7.3 of this order. For the detailed discussion please refer to the relevant paragraph. Respectfully following the same we hold that there cannot be any disallowance on account of interest expenses. 14.2. Regarding the disallowance of administrative expenses, we note that the AO has invoked the provisions of section 14A read with rule 8D mechanically without referring to the books of accounts of the assessee. As such the assessee has not claimed any expenditure against such exempted income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its affairs separately. The partners are holding the mutual agency in the partnership firm and unless the partners are shown to be drawing remuneration from the assessee concern and at the same time investing its attention in the partnership firm, there is no perceptible reason to disbelieve the assessee for not incurring in expenditure. We, thus, find no reason to thrust mechanical application of Rule 8D(2)(iii) of the Act in the given facts. The order of the CIT(A) is consequently set aside and the AO is directed to reverse the disallowance made in Rule 8D(2)(iii) r.w.s 14A of the Act ." 14.3. In view of the above, we hold that there cannot be any disallowance on account of interest and administrative expenses under the provisions of s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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