TMI Blog2020 (3) TMI 1223X X X X Extracts X X X X X X X X Extracts X X X X ..... Towers project eligible for deduction u/s.80IAB(4)(iii) of the Act and the other project on which the Assessee claimed deduction u/s.80IA of the Act. The CIT(A) however in paragraph-7 of his order observed that the Assessee has negative income after setting off loss of earlier years business loss and hence he did not allow any deduction u/s.80IAB(4)(iii). - Therefore the grounds raised by the revenue in this regard are without any basis and does not arise out of the order of the CIT(A). - Decided against the revenue. Disallowance of expenses u/s.14A r.w.r. 8D - HELD THAT:- There can be no dispute on the availability of own funds more than the investments that are likely to yield tax free income. This finding of the CIT(A) has not been shown to be erroneous except a submission that own funds and borrowed funds come from a common pool of funds. The law by now is well-settled that if available interest-free funds are much more than investments in dividend yielding shares, then there can be no disallowance under rule 8D(2)(ii) of the Act. In the case of CIT Vs. HDFC Bank Ltd. [ 2014 (8) TMI 119 - BOMBAY HIGH COURT] it was held where assessee's own funds and other non-intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8,000 sq. ft. was leased to M/s. I-Flex Solutions Ltd., which is more than 60% of the total allocable area. 4. The CIT(A) erred in not appreciating the fact that out of the three companies found to be available, M/s. Transworks Information Services Ltd. and M/s. Transworks IT services were actually one and the same company amalgamated by an order of Hon'ble High Court of Mumbai. 5. The CIT(A) erred in allowing relief without appreciating that in the relied upon order for the assessment year 2004-05 the CIT himself has made an observation that the assessee started with only one tenant in the period relevant to the assessment year 2004-05. 6. The CIT(A) erred in directing to grant deduction 80IA(4)(iii) of the I.T. Act following the orders for the earlier years in view of the decision of the jurisdiction Bench of the ITAT in the case of Primal Projects Pvt. Ltd.(139-TTJ-233) without appreciating that the said decision has not yet reached a finality. 3. As far as the aforesaid grounds of appeal are concerned, the facts are that the Assessee is a company engaged in property development including Information Technology Park (IT Park) and Special Economic Zone (SEZ). The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om business. In this regard AO observed in his order at paragraph-6.2 that if the Assessee takes a view before the appellate authorities that alternatively it is eligible to claim deduction u/s.80IAB(4)(iii) of the Act, such deduction should not be allowed for the reasons which he had given in his order of Assessment for AY 2011-12. In the grounds of appeal before the CIT(A) in ground No.3 the Assessee has raised a ground challenging the action of the AO in denying deduction u/s.80IAB(4)(iii) of the Act but that ground of appeal mentions the sum of ₹ 3,29,18,939/- which sum is the sum claimed as deduction in AY 2011-12. It should be read as ₹ 1,17,35,191/- which was the sum treated by the AO as income from Millennium Project. 5. The CIT(A) in paragraph 4.3 of his order held that if the AO considers income from Millennium project as Business income then he should allow all the expenses claimed by the Assessee and therefore the income from Millennium project arrived at by the AO at ₹ 1,17,35,191 was not proper. By reason of this conclusion, there would be only loss from the project Millennium and therefore there is no occasion to allow deduction u/s.80IAB(4)(i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pertaining to tax-exempt investments NIL B Total amount of indirect interest pertaining to tax exempt investments ₹ 14,79,79,010/- A.Y.2012-13 A.Y. 2011-10 Average C Average amount of tax exempt investments 144,28,34,179 118,32,63,765 131,30,48,968 D Average Amount of Total Assets 627,36,26,645 543,67,72,896 585,51,99,771 E Proportionate indirect interest to be disallowed B X C D 14,79,79,010 x 131,30,48,968 585,51,99,771 = 3,31,84,809 F 0.5% of average amount of tax exempt investment 65,65,245 G Total Disallowance attracted u/s. 14A read with Rule 8D 3,97,50,054 7.6. Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the earning of business income of the appellant company. Therefore, none of the interest payments can be considered under Rule 8D(2)(ii) of the I.T. Act. In this context, the decision of the Hon'ble Tribunal of Kolkata Bench in the case of Champion Commercial Ltd. [139 ITD 108(Kol)] supports the above view. The relevant portion of the said decision is extracted below: we make it clear that common interest expenses which are to be allocated in terms of the formula under Rule 8D (2) (i ) will be only such interest expenses as are neither directly attributable borrowings specifically used for tax- exempt incomes or receipts nor are directly attributable to borrowing specifically used taxable incomes or receipts. 6.7 Thus the said payment cannot be attributed to borrowing specifically used for tax exempt income. There is no material / evidence on record to show the nexus between the borrowals and tax-free investments. Further, even though the appellant has made tax free investments during the year under consideration, but it is also noted that the appellant having sufficient noninterest bearing fund during the year. 6.8 In view of the above decision, none of the interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les were applicable i.e., where interest expenses are not directly attributable to any particular income or receipt. The revenue has not challenged the finding of the CIT(A) with regard to availability of own funds which is much more than the investments that are likely to yield tax free income in the last sentence of paragraph 6.7 of its order. In this regard we have perused the Balance Sheet of the Assessee as on 31.3.2012 and we find that the investments by the Assessee are to the tune of ₹ 144,28,34,179 whereas the availability of own funds as on that date were in the form of share capital and reserves and surplus of ₹ 36,40,000/- and ₹ 185,38,73,455 respectively besides availability of rental deposits which are interest free of ₹ 230,47,70,914/-. There can be no dispute on the availability of own funds more than the investments that are likely to yield tax free income. This finding of the CIT(A) has not been shown to be erroneous except a submission that own funds and borrowed funds come from a common pool of funds. The law by now is well-settled that if available interest-free funds are much more than investments in dividend yielding shares, then th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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