TMI Blog2022 (5) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... Dividend income was earned from only one investment i.e. Metro Diary Limited - 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 has been made in the shares of Metro Dairy Ltd. as the opening value as on 01.04.2012 was Rs.9,60,50,074/- and closing value of investment as on 31.03.2013 was Rs.9,60,50,074/-. Accordingly, by taking the investments which yielded the exempt income for computing disallowance under Rule 8D(2)(iii) of the Rules @ 0.50% of the dividend earning investment of Rs.9,60,50,074/- comes to Rs.4,80,250/-. The assessee has already made a suo moto disallowance of Rs.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amination of related particulars available on records, it was found that the disallowance of expenses made by the assessee was not in conformity with Rule 8D of the Rules. In view of this fact, for the related expenditure as per the provision of section 14A of the Act read with Rule 8D of the Rules, the AO calculated the disallowance at Rs.3,12,81,060/-, which is available at page 4 of the assessment order. Since the assessee suo moto disallowed and added backRs.2,04,697/- in its computation of total income, the balance of expenditure in question i.e. Rs.3,10,76,363/- was disallowed by AO and accordingly added back to the returned income of the assessee for taxation purpose. 4. Aggrieved, assessee preferred an appeal before the Ld. CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant an opportunity of hearing before passing any order in this regard. The disallowance should not be less than the amount already added back by the appellate company if any. This ground is therefore allowed for statistical purposes. Aggrieved, against the aforesaid order of Ld. CIT(A), the assessee is in appeal before us. 5. At the time of hearing, the Ld. AR for the assessee has submitted that the assessee had earned dividend income of Rs.25,25,790/- which is exempt u/s. 10(34) of the Act. The AO in his assessment order has disallowed a sum of Rs.3,10,76,363/- u/s. 14A of the Act read with rule 8D(2)(ii) and (iii) of the Rules. The Ld. AR before the Ld. CIT(A) submitted that no disallowance of interest expenditure could h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee was Rs.58,81,17,048/-. According to him, it is evident from the audited financial statement placed on record that the assessee had sufficient own funds for making investments from which dividend was earned. According to him, it is a settled principle of law that if the own funds 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, he relied on the decision of ITAT, Kolkata in the case of Balarampur Chini Mills Ltd. Vs. DCIT (2011) 140 TTJ (Kol) 73. He also placed reliance on the decision of Hon ble Bombay High court in the case of CIT Vs. Reliance Utilitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d herein, we hold that no disallowance of interest expenditure is warranted under Rule 8D(2)(ii) of the Rule r.w.s. 14A of the Act. Accordingly, the disallowance of Rs.2,84,43,090/- computed by the AO under Rule 8D(2)(ii) is deleted. 9. We find that the dividend income was earned from only one investment i.e. Metro Diary Limited. We also find force in the submission of the Ld. AR that the disallowance u/s. 14A of the Act read with rule 8D(2)(iii) of the Rules can be made by considering only those investments from which dividend income was earned by placing reliance on the decision of the ITAT, Kolkata in the case of DCIT Vs. REI Agro Ltd. (supra) which was further affirmed by the Hon ble Calcutta High Court. We also find that the Ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee out of its own funds. We also find that no new investment during the year has been made in the shares of Metro Dairy Ltd. as the opening value as on 01.04.2012 was Rs.9,60,50,074/- and closing value of investment as on 31.03.2013 was Rs.9,60,50,074/-. Accordingly, by taking the investments which yielded the exempt income for computing disallowance under Rule 8D(2)(iii) of the Rules @ 0.50% of the dividend earning investment of Rs.9,60,50,074/- comes to Rs.4,80,250/-. The assessee has already made a suo moto disallowance of Rs.2,04,697/- in its return, thus, balance amount of Rs.2,75,553/- (Rs.4,80,250-Rs.2,04,697) is sustained as disallowance u/s. 14A r.w.r. 8D(2)(iii) of the Act. The appeal of the assessee is, therefore, partly allo ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
