TMI Blog2018 (8) TMI 1982X X X X Extracts X X X X X X X X Extracts X X X X ..... Disallowance of expenses relatable to exempt income by invoking the provisions of section 14A read with Rule 8D(2)(ii) of the Rules i.e. disallowance of interest expenses - disallowance of exempt income under section 14A of the Act read with Rule 8D(2) while computing the income under section 115JB - HELD THAT:- After hearing both the sides, and going through the facts and circumstances of the case and the decision of Tribunals in assessee s own case for AY 2008-09, we find that the facts are exactly identical and respectfully following the same, we confirm the order of CIT(A) deleting the addition. The issue is covered in favour of assessee and against Revenue by the decision of Special Bench of this Tribunal in the case of ACIT vs. Vireet Investments (P.) Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI ] wherein the Tribunal has clearly held that no disallowance under section 14A of the Act r.w.r 8D of the Rules can be made while computing book profit under section 115JB of the Act. The learned Sr. DR could not controvert the above proposition. Accordingly, we are of the view that this issue is covered by the special bench decision of this Tribunal in the case of Vireet Investme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee was free to explain the business prudence for such transactions during the course of assessment proceeding. 3. At the outset, the learned Counsel for the assessee took us through the facts of the case from assessment order that the assessee in the preceding years has received loan from Lehman Brothers which has been utilized for giving loans to its subsidiaries and associated companies. According to AO, the rate of interest charged is lower than the interest paid to layman brothers and hence, according to him, the differential interest charged as expense is to be disallowed and added to the returned income of the assessee. The learned counsel for the assessee stated that the AO has relied on the decision of earlier year i.e. AY 2010-11 and for this he observed in Para 5.2 as under: - '5.2 The aforesaid submissions made by the assessee have been carefully appreciated. However, the same are not found to be acceptable. The issue remains same as in the previous year. Since the facts circumstances of the case are identical for this year also and there is no material change in the issue involved as compared to the preceding years, the issue is decided on the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charging any interest to the wholly owned subsidiaries. In the instant case before us, advance was given to the wholly owned subsidiaries at an interest rate of 9%. Following the proposition of law laid down in the above judicial pronouncements, we do not find any infirmity in the order of ClT(A) for deleting the disallowance of interest so made by the AO.. 5. The learned Counsel for the assessee also narrated the fact that in this year interest charged from subsidiary is at the rate of 6% as against 9% in earlier years and also received funds from Lehman Brothers at the rate of 12 % as against at the rate of 13.5% in earlier year. When the above order was confronted to the learned CIT DR, Shri R Manjunatha Swamy, he only relied on the assessment order. 6. After hearing both the sides and going through the orders of the lower authorities also the Tribunal order in earlier years, we respectively following the same, confirm the order of CIT(A) deleting the disallowance of interest. Accordingly, this issue of Revenue s appeal is dismissed. 7. The next issue in this appeal of Revenue is against the order of CIT(A) deleting the disallowance of expenses relatable to exempt i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant has a large portfolio; the average tax free investment held by the Appellant is ₹ 1,147.94 Crores. Against this investment in tax free securities, the appellant has only made a disallowance of ₹ 5,72,183/- which obviously is inadequate. Although the appellant has given a number of arguments based on the facts of its case, still, inspite of that due to detailed reasons given by AO in the assessment order on pages 6 to 20, it cannot be accepted that the suo moto disallowance offered by the appellant at ₹ 5,72,183/- was adequate. Hence, the AO was justified in computing the disallowance tinder Rule 8D r.w.s. 14A of the Act. The latest decision available on this issue is the judgment of Hon'ble high court in the case of Godrej and Boyce Manufacturing company Ltd [328 ITR 81] wherein the Hon'ble court has held that the dividend income and income from mutual funds etc., are not includible in computing the total income of the assessee. Consequently, no deduction shall be allowed in respect of income incurred by the assessee in relation to such income. It has also been held that the provision of Rule 8D of the I.T. Rules 1962 shall apply with effect fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the appellant is upheld. Thus this ground of appeal is partly allowed. 9. The learned Counsel for the assessee stated that even the Tribunal deleted the similar addition in ITA No. 668/Mum/2011 for the AY 2008-09 vide order dated 14.03.2018 by observing in Para 18,19,20 as under: - 18. We have considered rival contentions and carefully gone through the orders of the authorities below. We had also deliberated on the judicial pronouncements referred by lower authorities in their respective orders as well as cited by learned AR and DR during the course of hearing before us in the context of factual matrix of the case. From the record we found that own funds of the assessee i.e., share capital and reserves at the end of the year is ₹ 13,49,75,79,368/- however, against this own fund assessee made investment of ₹ 10,59,23,39,574/-. Thus, there was extra own funds of ₹ 2,90,52,39,794/-. With regard to the interest expenditure, we found that interest expenses during the year was ₹ 77,23,08,554/- where as interest income was ₹ 93,48,14,787/-. Thus, there was net income of ₹ 16,25,06,233/- on account of interest. A clear finding has been r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. 12. At the outset, the learned Counsel for the assessee stated that this issue is covered in favour of assessee and against Revenue by the decision of Special Bench of this Tribunal in the case of ACIT vs. Vireet Investments (P.) Ltd. [2017] 58 ITR (AT) 313 (Delhi - Trib.) (SB) wherein the Tribunal has clearly held that no disallowance under section 14A of the Act r.w.r 8D of the Rules can be made while computing book profit under section 115JB of the Act. The learned Sr. DR could not controvert the above proposition. Accordingly, we are of the view that this issue is covered by the special bench decision of this Tribunal in the case of Vireet Investments (P.) Ltd. (supra). Respectfully following the same, we delete the disallowance and allow this issue of assessee s appeal. This issue of Revenue s appeal is dismissed and that CO of the assessee is allowed. 13. One more issue in this Cross Objection of the assessee is as regards to the order of CIT(A) in directing the AO to consider only those investments on which assessee has actually earned exempt income for the purpose of disallowance under section 14A of the Act read with Rule 8D(2)(iii) of the Rules. For this as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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