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TMI Blog2022 (5) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... d to as the "Act") dated 02.03.2016. 2. The sole issue involved in this appeal of assessee is against the action of Ld. CIT(A) in directing the AO to recompute the disallowance u/s. 14A read with Rule 8D(2)(ii) & (ii) of the Income Tax Rules, 1962 (hereinafter referred to as the "Rules"). 3. Briefly stated, facts of the case as observed by the AO are that the assessee company claimed to have earned dividend of Rs.25,25,790/- in the previous year under consideration. This dividend income was claimed by the assessee as exempt from tax in its return of income and accordingly disallowed suo moto an expense of Rs.2,04,697/- in the computation of total income. According to the AO, on examination of related particulars available on records, it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ules. The aforesaid view of the Tribunal has since been affirmed as correct by the Hon'ble Calcutta High Court in G.A. No 3581 of 2013 in the appeal against the order of the Tribunal in the case of REI Agro Ltd (Supra). Keeping in view, of above and by following the judgement of Hon'ble jurisdictional ITAT, the AO is directed to recalculate the disallowance of those shares, which has yielded dividend income while taking the investment. In view of above, 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 80(2) (ii) and (iii). The AO shall allow the appellant an opportunity of hearing before passing any order in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) in his order has not discussed the argument of the assessee in relation to the own funds having been utilized for making investments. According to him, the ld. CIT(A) simply followed the decision of the Hon'ble Calcutta High Court in GA No. 3581 of 2013 in the appeal against the order of the Tribunal in the case of REI Agro Ltd. and directed the AO to recalculate the disallowance u/s. 14A r.w.r 8D(2)(ii) & (iii) of the Rules on those shares which had yielded dividend income during the year. 6. In this connection, the Ld. AR also submitted that the assessee had total own funds of Rs.78,12,59,137/- as on 31.03.2013 and the total investment standing in the books of the assessee was Rs.58,81,17,048/-. According to him, it is evident from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Rules was applicable, so he does not want us to interfere. 8. We have heard rival submissions and gone through the facts and circumstances of the case. Facts are not repeated here again for the sake of brevity. We find force in the submission of the Ld. AR that no disallowance of interest expenditure could have been made u/s. 14A of the Act read with Rule 8D(2)(ii) of the Rules as the investments were made out of the own funds of the assessee. In this regard he placed reliance on the decision of the Hon'ble Bombay High court in the case of CIT Vs. Reliance Utilities and Power Ltd. (supra). Considering the facts on record and the judicial precedents as noted herein, we hold that no disallowance of interest expenditure is warranted u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds are sufficient to cover the investments which are subject matter of consideration for applicability of sec. 14A of the Act, then a presumption has to be drawn that own funds were used for making such investments. For this purpose, reliance is placed on the decision of coordinate bench of ITAT, Kolkata in the case of Balarampur Chini Mills Ltd. Vs. DCIT (supra). Reliance is also placed on the decision of Hon'ble Bombay High court in the case of CIT Vs. Reliance Utilities and Power Ltd. (supra). Considering these judicial precedents, when there is a common pool of funds, presumption would arise that investments which yield tax free returns were made by the assessee out of its own funds. We also find that no new investment during the year ..... X X X X Extracts X X X X X X X X Extracts X X X X
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