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Income Tax Appellate Tribunal, “A” BENCH, KOLKATA
Before: DR. MANISH BORAD, HON’BLE & SHRI SONJOY SARMA, HON’BLE
O R D E R
PER DR. MANISH BORAD, ACCOUNTANT MEMBER :
The present appeal is directed at the instance of the assessee against the order of the National Faceless Appeal Centre, (hereinafter the “ld. CIT(A)”) dt. 31/03/2023, passed u/s 250 of the Income Tax Act, 1961 (“the Act”) for the Assessment Year 2013-14.
At the outset, the ld. Counsel for the assessee requested for not pressing Ground No. 2 and the same is hereby dismissed as not pressed.
Ground Nos. 3 & 4 are general in nature.
The only effective ground raised before this Tribunal in Ground No.1 which relates to disallowance u/s 14A of the Act at Rs.42,49,970/-.
Assessment Year: 2013-14 MSTC Limited 5. At the outset, the ld. Counsel for the assessee, submitted that the alleged disallowance u/s 14A of the Act is made under limb (2) of Rule 8D of the Income Tax Rules, 1962 (hereinafter ‘the Rules’) i.e., interest disallowance on account of interest-bearing funds being applied for making investment fetching exempt income. He stated that the assessee company has sufficient interest free reserves in the form of share capital and reserves and surplus which are far more than the investments giving rise to the exempt income. He further stated that it has been consistently held by Hon’ble Courts that if the interest free funds are available and there is no finding of the revenue authorities that interest-bearing funds have been applied for making investments giving rise to exempt income then under such circumstances interest disallowance u/s 14A of the Act, is uncalled for.
On the other hand, the ld. D/R supported the orders of the lower authorities.
We have heard rival contentions and perused the record placed before us. Interest disallowance u/s 14A r.w. Rule 8D(2) is in the challenge before us. We observe that the assessee is limited company and is a Government of India undertaking and for Assessment Year 2013-14, suo moto disallowance at Rs.7,90,500/- is made as per Rule 8D(2)(iii) being 0.5% of the average value of investment. However, the ld. Assessing Officer further calculated interest disallowance under Rule 8D(2)(ii) at Rs.42,49,970/-. 7.1. Before us, audited financial statements of the assessee company has been placed which is forming part of the paper book filed on 12th