TMI Blog2021 (6) TMI 286X X X X Extracts X X X X X X X X Extracts X X X X ..... s - See HDFC BANK LTD. VERSUS THE DEPUTY COMMISSIONER OF INCOME TAX-2 (3) , MUMBAI OTHERS [ 2016 (3) TMI 755 - BOMBAY HIGH COURT] THE COMMISSIONER OF INCOME TAX VERSUS RELIANCE UTILITIES POWER LTD. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] We find that the assessee has sufficient funds for making investments and the A.O has not doubted the availability of the funds but made disallowance invoking the provisions of Sec.14A r.w.r 8D(2)(ii).The Ld. DR could not substantiate or controvert the findings of the CIT(A) with any new cogent material or information but relied only on the order of the A.O. Accordingly, we do not find any merits in the submissions of the revenue and the CIT(A) considered the facts and relied on the judicial decisions and has passed a reasoned order - Appeals filed by the revenue are dismissed. - ITA Nos. 3055, 3056, 3057 & 3058/Mum/2019 - - - Dated:- 4-6-2021 - Shri M Balaganesh, Accountant Member And Shri Pavan Kumar Gadale, Judicial Member For the Appellant : Ms. Shreekala Pardeshi, DR For the Respondent : None ORDER PER BENCH: These four appeals are filed by the Revenue against the separate orders of the Commissioner of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act is warranted. The assessee has filed the explanations referred at Para -7 to 10 of the order as under: 7. The assessee submits that it has minimal activities relating to exempt income. It is neither an investor nor a trader in shares. It has made investments in the subsidiary companies to retain management and control of such companies and not to earn income. The said investments were made out of proprietary funds and not out of borrowed funds. In this regard, the assessee has relied on the decision of the ITAT Mumbai in the case of Garware Wall Ropes Limited V Additional CIT(ITA No 5408/Mum/2012 and ITA NO.4957/Mum/2012). To this effect, the ITAT has also directed the undersigned to reconsider the issue in light of such decision, As such, during the computation of disallowance under rule 8D, the investment in subsidiaries is not being considered. 8. On the issue of borrowings being short-term, the assessee has submitted that the monies have been borrowed through commercial paper of short- term nature and through debentures, and such short term borrowings cannot be used for making long-term investments. 8.1 This plea of the assessee cannot be accepted. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee and has dealt exclusively on the disallowance u/s 14A r.w.r 8D(2) and relied on the decisions of the Hon ble High Court and Honble Tribunal. The CIT(A) has observed that the assessee company has made the investments out of its own funds not borrowed funds, whereas the borrowed funds are utilized for the purpose of business and the investments has been made to control the management of subsidiaries. The long term borrowings and short term borrowing cannot be used for long term investments and therefore no disallowance u/s14A r.w.r 8D(2)(ii) is warranted. Whereas the Ld. AR submitted that the assessee has sufficient interest free funds and the reserves and surplus and share capital is ₹ 1,231.5 crores and the interest free funds were used for investments. Further, the interest free funds available to the assessee are more than the investments made during the year and relied on the judicial decisions. The CIT(A) has dealt on the financial aspects and considered the facts that the assessee company investments are out of the interest free funds and therefore disallowance u/s 14A r.w.r 8D(2)(ii) is not sustainable and directed the A.O to delete the addition. Whereas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant's claim that it had sufficient interest free fund of its own with reference to appellant's balance sheets and found that the claim is correct. The Hon'ble Bombay High Court in the case of Reliance Utilities Power Ltd. (Supra) held as under: The principle therefore would be that if there are funds available both interest-free and overdraft and/or loans taken, then a presumption would arise that investments would be out of the interest-free fund generated or available with the company, if the interest-free funds were sufficient to meet the investments. 4.4.3 I find that in the impugned order the AO did not rebut the presumption with any specific finding. The AO argued that since roughly 29% of appellant's investments were short-term investments, those investments could have been out of short-term borrowings. The AO, however, did not rebut the presumption that the investments relatable to the exempt income were out of appellant's interest free funds with any specific finding. I, therefore, hold that the disallowance made by invoking the provisions of section 14A r.w.r 8D(2)(ii) is not sustainable. Therefore, I direct the AO to delete the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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