TMI Blog2020 (4) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... g sufficient interest free funds at its disposal. Similar view was taken by the Hon'ble Supreme Court in the case of Hero Cycles Pvt. Ltd. [ 2015 (11) TMI 1314 - SUPREME COURT] held that no disallowance is called for if the assessee has got own surplus fund. Keeping in view the fact that the assessee has got sufficient own funds to extend the loans interest free, we hereby direct that the disallowance made under section 36(1)(iii) be deleted. - Decided in favour of assessee. Disallowance u/s 14A r.w.r 8D(2)(iii) - 0.5% has applied on the average investments - AR argued that earning dividends is not an assured activity, no business man will ever incur a recurring in anticipation of non-assured returns especially dividends - HELD THAT:- We hereby hold that the disallowance needs to be restricted to the dividend yielding investment only for the years involved. The Assessing Officer is hereby directed to re-compute the disallowance taking into consideration, the dividend yielding investments -The disallowance under Rule 8D(2)(iii) be restricted to dividend yielding investments to determine the average value of the investments. - Decided in favour of assessee. - ITA No. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tax erred in ignoring the fact that the appellant had advanced the loans and advances from its own funds and not out of the borrowed funds. 3. The ld. CIT (Appeals) of Income Tax erred in not accepting the disallowance amounting to ₹ 4,10,947/- u/s 14A made by the appellant and allowed the enhancement of disallowance by ₹ 40,79,583/- made by the Assessing Officer. The increase in disallowance u/s 14A is not at all justified and requires revision. Full arguments and detailed submissions will be made at the time of hearing. 6. The issues involved in these appeals to be adjudicated are, i. Disallowance of interest payment on the interest free advances given by the assessee. ii. Disallowance u/s 14A of the Income Tax Act, 1961 more than the disallowance made by the assessee suo moto . 7. The assessment year 2012-13 is taken as the lead case for the sake of convenience on the issue of interest payments. 8. Brief facts of the case taken from the record are that, during the relevant financial year, the assessee earned interest income of ₹ 8,73,13,968/- and also debited interest expenses of ₹ 16,31,794/-. From the details of interest paid fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT in ITA No. 224/2013, dated 24.07.2015, it was held that if there are interest free funds available then it will be presumed that these have been made out of interest free funds. Similar view was held in the case of CIT Vs. Kapsons Associates Investment Pvt. Ltd. (2015) 381 ITR 204 (P H) wherein, the Hon'ble Court has held that interest on investment in other properties not for business purpose cannot be disallowed if the assessee is having sufficient interest free funds at its disposal. Similar view was taken by the Hon'ble Supreme Court in the case of Hero Cycles Pvt. Ltd. 63 Taxman 308 held that no disallowance is called for if the assessee has got own surplus fund. 12. Keeping in view the facts and circumstances of the case and the judicial pronouncements and keeping in view the fact that the assessee has got sufficient own funds to extend the loans interest free, we hereby direct that the disallowance made under section 36(1)(iii) be deleted. 13. The other ground relates to disallowance u/s 14A r.w.r 8D(2)(iii). The facts mentioned by the AO are that the revenue enquired vide query letter dated 26.06.2015 to provide the basis on which ₹ 4,10,947/- has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finding has not been given by the Assessing Officer as to what was motive of the company of the invests ₹ 111 crores. The ld. AR argued that keeping in view the judgment of the Special Bench of ITAT in the case of Vireet Investment Pvt. Ltd. in ITA No. 502/Del/2012 vide order dated 16.06.2017, the non-dividend yielding investments ought to have been excluded. 16. Heard the arguments of both the parties and perused the material available on record. 17. The closing value of opening value of investment and average investment are as under:- Closing value of investments ₹ 99,12,68,846 Opening value of investments ₹ 80,48,23,266 Average value of investments ₹ 89,80,46,056 18. The assessee has disallowed the expenses u/s 14A of ₹ 4,10,947/-. Since, the assessee has not given any basis so Assessing Officer applied Rule 8D(2)(iii) and worked out disallowance of ₹ 44,90,230/-. 19. The details of the investments dividend yielding and non-exempt income is as under: VIC ENTERPRISES PRIVATE LIMITED ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxable, may depend upon the nature of transaction entered into in the subsequent assessment year. For example, long term. capital gain on sale of shares is presently not taxable where security transaction tax has been paid, but a private sale of shares in an off market transaction attracts capital gains tax. It is an undisputed position that respondent assessee is an investment company and had invested by purchasing a substantial number of shares and thereby securing right to management. Possibility of sale of shares by private placement etc. cannot be ruled out and is not all improbability. Dividend may or may not be declared. Dividend is declared by the company and strictly in legal sense, a shareholder has no control and cannot insist on payment of dividend. When declared, it is subjected to dividend distribution tax. 21. Hence, keeping in view the legal and factual position of the case, we hereby hold that the disallowance needs to be restricted to the dividend yielding investment only for the years involved. The Assessing Officer is hereby directed to re-compute the disallowance taking into consideration, the dividend yielding investments. 22. In the result, we hereby ..... X X X X Extracts X X X X X X X X Extracts X X X X
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