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TMI Blog2019 (12) TMI 1417X X X X Extracts X X X X X X X X Extracts X X X X ..... The grounds of appeal raised by the assessee are as follows: 1. For that on the facts and in the circumstances of the case, the ld. CIT(A) was unjustified in law and on facts in setting aside the disallowance as per Rule 8D(2)(ii) to the file of Assessing Officer even though it was demonstrated before the lower authorities that the appellant's net own funds in the form of capital & free reserves were much higher than the investments in shares. 2. For that on the facts and in the circumstances of the case, the ld. CIT(A) ought not to have restored the issue of quantification of disallowance under Rule 8D(2)(ii) in respect of interest paid to the A.O's file when in the preceding and subsequent assessment years the appellate authorities, f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has submitted that the entire investments have been made out of own interest free funds and no interest-bearing borrowings whatsoever has been utilized for making such investments. The Interest: Expenditure was directly attributable to the business activities of the appellant and therefore no portion of interest attributable to investments/ securities. The appellant further submits that the interest expenses of Rs. 20066.77 lacs pertains to interest paid to banks & financial institutions for obtaining term loans, cash credit facilities, working capital limits, packing other related export credits etc. It is submitted that all these loans were secured against the fixed assets and working capital comprising of stock, sundry debtors etc. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) dated 27.01.2014. In the decided case the ITAT held that Rule 8D(2)(ii) is very clear that the expenditure on account of payment of interest would be covered in the said Rule only if it is not directly attributable to any particular income or receipt. The ITAT therefore held that if the assessee is ableto demonstrate that the payment of interest is directly attributable to the assessee's business then it cannot be considered under Rule 8D (2) (ii) of the I.T. Rules. Similar view was also expressed by the Chennai Bench of Income-tax Appellate Tribunal in the case of ACIT Vs Best & Crompton Engineering Ltd (ITA No. 1603/Mds/2012) dated 16.07.2013 wherein the Tribunal categorically held that if loans have been sanctioned for specific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the appellant shall furnish before the AO the details in the matter. The AO is also directed to verify the same and accordingly re-compute the disallowance u/s 14A r.w. Rule 8D. The AO shall allow the appellant an opportunity of hearing before passing any order in this regard. This ground is therefore allowed for statistical purposes. As regards to disallowance of ihe expenses under rule 8D (iii) Hon'ble jurisdictional ITAT in the case of RE1 Agro Ltd. vs. DC1T (144 ITD 141) has held that only the investments which actually yield exempt income has to be considered for the purposes of application of Rule 8D(2)(iii). The ITAT held that the investments which did not yield any tax-free income in the relevant year were not required to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance sheet of the assessee company as on 31.03.2013. On perusal of Balance sheet, we noticed that own funds of the assessee company is Rs. 1,15,771/- lakhs, which is more than the investments in shares and securities to the tune of Rs. 18,089/- lakhs. Since Company's net owned funds in the form of equity capital and free reserves were substantially more than the cost of share investment, yielding dividend income, no part of the interest paid is disallowable because borrowed funds were not used for acquiring shares. For that we rely on the judgment of the Hon'ble Calcutta High Court decision in the case of CIT vs HDFC Bank Ltd. [49 taxmann.com 335). Therefore, the disallowance under Rule 8D(2)(ii) read with Section 14A is not attracted in a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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