TMI Blog2021 (8) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... it on the legal issue urged by the assessee. Accordingly, we reject the legal ground relating to recording of satisfaction/dissatisfaction by the A.O. Disallowance under Rule 8D(2)(ii) - Assessee has floated many sister concerns and there has been transfer of funds (interest free) between the sister concerns. Hence the assessee has shown both interest free funds received from the sister concerns and also advances given to other sister concerns in the above statement. A perusal of the above statement would show that the own funds and interest free funds available with the assessee are in excess of the value of investments in subsidiaries/related concerns and interest free advances given by the assessee. Hence, as per the decision rendered in the case of CIT Vs. Micro Labs Ltd. [ 2016 (4) TMI 219 - KARNATAKA HIGH COURT] no disallowance out of interest expenditure is called for under Rule 8D(2)(ii). Disallowance of other expenses under Rule 8D(2)(iii) - It is the case of the assessee that it has received exempt income only from one/two partnership concerns - as submitted that, for the purpose of computing average value of investments, only those investments which have yie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d exempt income in assessment years 2013-14 TO 2015-16. However, in AY 2016-17, the assessee had made disallowance of round sum of ₹ 5.00 lakhs u/s 14A of the Act. Hence the A.O. has computed the disallowance u/s 14A of the Act read with Rule 8D as under: Assessment year Interest disallowance under Rule 8D(2)(ii) Expenditure disallowance under Rule 8D(2)(iii) 2013-14 61,05,257 34,41,876 2014-15 3,90,418 43,04,968 2015-16 -- 52,92,691 2016-17 -- 53,31,451* (*After deducting ₹ 5.00 lakhs, being the disallowance made by the assessee) The Ld. CIT(A) confirmed the addition made by the A.O. Hence the assessee has filed all these appeals challenging the decision rendered by Ld CIT(A) on the impugned issue. 4. The Ld. A.R. submitted that the A.O. has made disallowance out of interest expenditure u/r 8D(2)(ii) in assessment year 2013-14 2014-15 only. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him in the assessment order. We find support for this proposition from the decision rendered by Hon'ble Supreme Court in the case of MAK Data (P) Ltd,(2014)(1 SCC 674) wherein it was observed as under:- 10. The AO has to satisfy whether the penalty proceedings be initiated or not during the course of the assessment proceedings and the AO is not required to record his satisfaction in a particular manner or reduce it into writing. Even though, the above said observation was made in the context of penalty levied u/s 271(1)(c) of the Act, yet the said ratio, in our view, could equally be applied to sec.14A of the Act in the matter of recording of satisfaction/dissatisfaction . In the instant cases, we have earlier noticed that the A.O. has made detailed discussion in all the years under consideration on the applicability of sec.14A of the Act, that too, after considering the letter filed by the assessee. Meaning thereby, the assessing officer has shown that he was not satisfied with the claim of the assessee. Accordingly, we do not find any merit on the legal issue urged by the assessee. Accordingly, we reject the legal ground relating to recording of satisfaction/diss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er passed by Hon ble Karnataka High Court: 40. We have heard the rival submissions. A copy of the availability of funds and investments made was filed before us which is at pages 38 to 42 of the assessee's paper book and the same is enclosed as ANNEXURE-III to this order. It is clear from the said statement that the availability of profit, share capital and reserves surplus was much more than investments made by the assessee which could yield tax free income. 41. The Hon'ble Bombay High Court in Reliance Utilities Power Ltd. 313 ITR 340 (Bom) has held that where the interest free funds far exceed the value of investments, it should be considered that investments have been made out of interest free funds and no disallowance u/s. 14A towards any interest expenditure can be made. This view was again confirmed by the Hon'ble Bombay High Court in CIT v. HDFC Bank Ltd., ITA No.330 of 2012, judgment dated 23.7.14, wherein it was held that when investments are made out of common pool of funds and non-interest bearing funds were more than the investments in tax free securities, no disallowance of interest expenditure u/s. 14A can be made. 42. In the light of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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