FINOLEX INDUSTRIES LIMITED,PUNE vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-AKURDI, PUNE, PUNE

O R D E R

Per PARTHA SARATHI CHAUDHURY, JM:

“1. The ld.CIT(A)-NFAC, erred in confirming disallowance u/s. 14A r.w.r.8D of Rs. 55,79,073/-. 2. The ld.CIT(A)-NFAC, erred in not appreciating that the investments which did not yield any income during the year under consideration ought to have been excluded while working out the disallowance u/s. 14A r.w.Rule 8D(iii). 3. The Appellant Company craves leave to add, alter, amend, modify and/or delete any or all of the grounds of appeal

.”

2. The relevant facts in this case are that the assessee-company is engaged in the business of manufacture and sale of PVC Resin, rigid PVC pipes and fittings, generation of power and internal consumption

Finolex Industries Ltd. thereof etc. The assessee filed its return of income for A.Y. 2016-17 on 30/11/2016 vide ack. no. 547751761301116, which was revised on 18/11/2017. The Assessing Officer (AO), vide order u/sec. 143(3), completed the assessment by making certain additions/disallowances and assessed the total income at Rs. 302,01,89,960/-. Now regarding the disallowance u/sec. 14A of the Act, which is the present grievance of the assessee in this appeal, the brief facts are that during the previous year 2015-16 relevant to the A.Y. 2016-17, investments made in shares, mutual funds etc. were Rs. 28,803.24 lakhs. Out of the said investments, an investment of Rs. 11,550.34 lakhs comprising mainly of investments in group companies yielded tax free dividend income. The assessee-company had not incurred any expenditure for earning exempt income. In spite of this, the assessee-company disallowed Rs.3.00 lakhs u/sec. 14A as a matter of abundant caution. Further, it was the case of the assessee that investments were not made from borrowed funds since it was not commercially prudent. Therefore, the assessee-company has not disallowed any interest expenses u/sec. 14A in its return of income. Accordingly, the assessee had disallowed administrative expenses to the extent of Rs. 3.00 lakhs as being incurred for earning exempt income u/sec. 14A of the Act. During the course of assessment proceedings, the AO had asked the assessee to show-cause as to why the above disallowance should not be made as per Rule 8D. Thereafter, the assessee had made submissions before the AO which are on record. However, these 2

Finolex Industries Ltd. submissions did not find favour with the AO and finally he disallowed expenses of Rs.55,79,073/- u/sec. 14A r.w.r 8D (over and above Rs. 3.00 lakhs already disallowed by the assessee u/sec. 14A) as per his findings in the assessment order.

5. Even before us, the ld.AR did not raise any dispute as to the confirmation of disallowance u/sec. 14A of the Act. It was, however, requested that only the investment which yielded exempt income should be considered for the purpose of calculation of disallowance and those investment which had not yielded any exempt income should be kept outside the purview of disallowance. That, on the same facts and circumstances and parity of reasoning, as held aforesaid we set aside the impugned order with the same directions as have been given in assessee‟s own case in (supra). The grounds of appeal raised by the assessee stands allowed for statistical purposes.

Order pronounced in open Court on 14th August, 2023.