TMI Blog2023 (2) TMI 574X X X X Extracts X X X X X X X X Extracts X X X X ..... f Tribunal and had held that no substantial question of law arise for consideration. - Decided against revenue. Disallowance under Rule 8D(2)(iii) - AO has considered the average value of the entire investments for working out the disallowance @ 0.5% of the average investments - HELD THAT:- We find that Hon ble Delhi High Court in the case of Delhi International Airport (P.) Ltd. [ 2022 (10) TMI 300 - DELHI HIGH COURT] has held that Section 14A of the Act envisages that there should be actual receipt of income and hence Section 14A of the Act will not apply where no exempt income is received or receivable during the relevant previous year. Before us, it is assessee s contention that the AO has considered the average value of the entire investments (which included investments from which no dividend has been received by the assessee) for working out of the disallowance under Rule 8D(2)(iii) of the Income-tax Rules - we find force in the arguments of Learned AR. We, therefore, restore the issue back to the file of AO and direct him to work out the disallowance under Rule 8D(2)(iii) of the Income-tax Rules on the basis of investments, which have yielded exempt income and in accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id down in the said Rule 8(2)(ii). 2. The appellant craves to add, amend any/all the grounds of appeal before or during the course of hearing of the appeal. Assessee s grounds of appeal in ITA No.757/Del/2021 for A.Y. 2016-17: That the Grounds raised hereunder are without prejudice of one another. 1. That the order dated 10.03.2021 passed u/s 250 of the IT Act by the Ld CIT(A), New Delhi is bad in law to the extent it is prejudicial to the interest of the appellant. 2. That on the facts and in the circumstances of the case and in law, the Ld CIT(A) has erred in upholding the action of the Ld AO in assuming jurisdiction to invoke Rule 8D r.w.s 14A(2) of the IT Act by holding that a valid satisfaction has been recorded by the Ld. AO. 3. That on the facts and in the circumstances of the case and in law, the Ld CIT(A) has erred in upholding the disallowance of an amount of Rs.6,25,00,000/- made by the AO under Rule 8D(2)(iii) of the IT Rules. 4. That without prejudice to the above grounds the Ld CIT(A) has erred by ignoring the fact that based on the jurisprudence, for the purpose of Rule 8D(2)(iii), Average Value of Investments will include only th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... funds are being sanctioned specifically for capital expenditure and/or other purposes in compliance with End- Use Guidelines dated 01.07.2005 of the RBI as amended from time to time and that the funds borrowed were not permitted for on-lending or investment in capital market including subscription/purchase of shares or any other speculative business and that End-Use of fund was to be certified by the auditors of the Society. In fact, such a certificate has also been placed on record at pages [P- 148/168/182/195/201/203/210/211/213 P/B] while sanctioning these Loans and Limits which include use for Business purpose only and specifically prohibit use of the funds for investment in shares of other companies or Capital Markets., wherein, the auditors of the Society have certified such End-Use in accordance with the RBI policy Under these circumstances, I am inclined to believe that the interest bearing funds borrowed by the appellant Society during the year under consideration have not been utilized for the purpose of making investments, the income from which did not form part of the total income of the appellant during the year. Therefore, the interest expenditure incurred by the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No.287/2022 order dated 21st August 2022. He placed on record the copy of the aforesaid decision. He, therefore, submitted that since the facts of the case in the year under consideration are identical to that of earlier years including 2011-12 and the decision for A.Y. 2011-12 has been upheld by the Hon ble High Court, no interference to the order of CIT(A) is called for. 10. We have heard the rival submissions and perused the material available on record. The issue in the present ground is with respect to the disallowance under Rule 8D(2)(ii) of the Income-tax Rules with respect to interest. We find that CIT(A) while deciding the issue in favour of the assessee has given a finding that on the loan that have been borrowed by the assessee for working capital purpose, Banks had imposed stringent End- Use conditions which prohibited the use of funds for investments in shares or other companies or capital market. The End-Use of the funds were monitored by considering the auditors certificate for End-Use compliance that were filed by the assessee. He has given a finding that no penal interest has been charged by the bank to the assessee or the loans have been recalled for viola ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) who granted partial relief to the assessee by deleting the disallowance to the extent of Rs.49.71 crore but upheld the disallowance under Rule 8D(2)(iii) of Rs.6.25 crores. Aggrieved by the order of CIT(A), assessee is now before us. 15. Before us, Learned AR reiterated the submissions made before the lower authorities and submitted that disallowance under Rule 8D(2)(iii) of the Income-tax Rules be restricted to investment, which actually yielded exempt income. He submitted that since the assessee has earned exempt income of Rs.2.48 crores, the disallowance be restricted to that amount. In support of its contention that for the purpose of disallowance under Rule 8D(2)(iii) of the Income-tax Rules, only investments which yield exempt income, are to be considered, he relied on the following decisions: Era Infrastructure (India) Limited reported in 288 Taxman 384 (Del) Delhi International Airport (P.) Ltd. reported in (2022) 144 taxman.com 80 (Del) Delhi High Court order dated 11.10.2022 in case of assessee in ITA No.390/2022 16. He, therefore, submitted that the matter may be remitted back to AO for deciding the issue afresh. 17. Learned DR on the other hand ..... X X X X Extracts X X X X X X X X Extracts X X X X
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