ALPESH NAVINCHANDRA GOSALIA ,MUMBAI vs. ACIT CIRCLE 27(1), MUMBAI
Income Tax Appellate Tribunal, MUMBAI BENCH “A” MUMBAI
Before: SHRI OM PRAKASH KANT () & SHRI SANDEEP SINGH KARHAIL () Assessment Year: 2012-13
PER OM PRAKASH KANT, AM This appeal has been preferred by the assessee against order dated 27.05.2025 passed by the Ld. Additional/Joint Commissioner of Income-tax (Appeals) – 1, Visakhapatnam [hereinafter shall be referred as ‘Ld. CIT(A)’] for assessment year 2012-13, raising following grounds: 1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in confirming the disallowance of expenses of ₹6,12,255/- u/s 14(A) r.w. Rule 8D.
On the fac CIT(A) has err aggregating to 2. Briefly stated, return of income Rs.49,11,498/-. The selected for scrutiny Act, 1961 (in short ‘t assessment complete Assessing Officer ma to Rs.6,12,255/- ; a and disallowance o amounting to Rs.5,5 sustained the additio the Act and disallowa assessee is in appe reproduced above. 3. We have heard the relevant mater containing pages 1 to No. 1 of the appeal, t assessee had shown assessment proceed expenditure of Rs.609 of the assessee and i Alpesh ITA cts and circumstances of the case and in red in confirming the disallowance of sev o ₹5,51,895/- which were claimed u/s facts of the case are that the on 28.07.2012 declaring to e return of income filed the y and statutory notices under the Act’) were issued and compl ed u/s 143(3) of the Act on 2 ade disallowance u/s 14A of the addition u/s 50C amounting to of deduction claimed u/s 57( 55,895/-. On further appeal, on in respect of disallowance m ance made u/s 57(iii) of the Act eal before us by way of grou rival submissions of the parti rials on record including th o 10 filed by the assessee. In rel the Ld. Counsel for the assessee n exempted income at Rs.75,00 dings offered for suo-motu d 9/- but the Assessing Officer re invoked Rule 8D of the Income- h Navinchandra Gosalia 2 A No. 4128/MUM/2025 n law, the Ld. veral expenses 57(iii). e assessee filed otal income at e assessee was the Income-tax lied with. In the 27.03.2015, the e Act amounting o Rs.6,74,000/- (iii) of the Act the Ld. CIT(A) made u/s 14A of t. Aggrieved, the unds raised as ies and perused he paper book lation to ground e submitted that 00/- and during disallowance of ejected the claim tax Rules, 1962
(in short ‘the Rules’) which comprise of di indirect expenses of disallowance under R the average value of Ld. Counsel for the a having sufficient ow
Rule8D(2)(ii) of the R assessee filed copy o and relied on the dec
Power Ltd. (2009) 1
Bank Ltd. [2014] 49
the disallowance und for the assessee subm
Bench in the case
Ltd. [2017] 82 taxm
(SB), the average inv which had yielded consideration. Before calculation indicati
Rs.18,600, which yie assessee has filed a d by the assessee which ALPESH GO SALIA A.Y.
Alpesh
ITA and computed disallowance of R sallowance under Rule 8D(2)(ii) the interest amounting to Rs.
Rule 8D(2)(iii) of the Rules for 0
the investment amounting to R assessee before us, submitted th wn fund and therefore, disal
Rules was not justified. In supp of the balance sheet to substan cision in the case of CIT v. Relian
78 Taxman 135 (Bombay) and taxmann.com 335 (Bombay). Fu der Rule 8D(2)(iii) of the Rules, mitted that in view of the decisio e of Asstt. CIT v. Vireet In mann.com 415/165 ITD 27
vestment should be restricted to dividend income during th e us, the ld. Counsel for the asse ng average value of the elded dividend income. The Ld.
disallowance chart under Rule h is reproduced as under:
2012-2013
h Navinchandra Gosalia
3
A No. 4128/MUM/2025
Rs.6,12,255/-. , of the Rules for .5,21,602/- and 0.5 percentile of Rs.88,640/-. The hat assessee was llowance under port thereof, the ntiate own funds nce Utilities and d CIT v. HDFC urther regarding the Ld. Counsel on of the Special nvestment (P.)
(Delhi - Trib.) o the investment he year under essee has filed a investment of Counsel for the 8D(2) computed
WORKING OF DISALLO
RULE 8D
8D (2)(i)
Expenditure Directly form part of total inc
8D (2)(ii)
Interest expenditure to any particular inc
Expenses
B=Average value of 8D (2)(iii)
0.5% of Average Inv
Note:
Average Value of Investm
Opening value of investmen
Closing value of investment
Average Value of Investmen investment
4. The Ld. Departm submitted that once claim of the assessee
Officer has no option
5. We have heard the relevant material
Bombay High Court
(supra) and decision undisputed that the covere the investmen income, then no disa
Alpesh
ITA
WANCE U/S 14A OF THE I.T.ACT 1
y relating to income which does not come e whichmis not directly attributable come or receipt A=Interest f Investment (income from which Rs. 1582506 Rs.
18600
Rs.57087697
vestments (18600*0.5%) ment nt
Rs 18600
t
Rs 18600
nt
Opening value of investment +
mental Representative (DR) on the Assessing Officer is dissa e invoking Rule 8D is mandatory otherwise then to follow the Ru rival submissions of the parti ls on record. As far as decision in the case of Reliance Utilitie n in the case of HDFC Bank Lt e own fund of the assessee a nt in the assets capable of ea allowance for interest invoking h Navinchandra Gosalia
4
A No. 4128/MUM/2025
961 AS PER
-
516
93
+ Closing value of the other hand, atisfied with the y and Assessing ule 8D.
ies and perused n of the Hon’ble es & Power Ltd.
td. (supra), it is are sufficient to arning exempted
Rule 8D(2)(ii) is warranted. The relev case of Reliance Uti under:
“8. We have opinion the contend or a tune of over fixed assets
1999, is fal balance shee be balance learned coun balance shee that the sha fixed assets balance she have been u rejected on t
9. Apart from of the CIT (A finding is re of its own w commencing balance she crores inclu context, in o
(Appeals) an really canno
10. If there sufficient to assessee ha investments opinion the Works Ltd.'s decision of t
Ltd.'s case ( the Supreme presumed th paid out of t
Alpesh
ITA vant finding of the Hon’ble Hig ilities & Power Ltd. (supra) is e heard learned counsel for both the p very basis on which the revenue ha argue their case that the shareholder r Rs. 172 crores was utilised for the in terms of the balance sheet as on llacious. Firstly, we are not concern et as of 31-3-1999. What would be re sheet as on 31-3-2000. Apart fro nsel has been unable to point out to et that the balance sheet as on 31-3-1
areholders funds were utilized for th
. To our mind the profit and loss acco eet would not show whether shareh utilised for investments. The argume this count also.
m that we have noted earlier that both
(Appeals) as also the Appellate Tribu ecorded that the assessee had intere which had been generated in the cours from 1-4-1999. Apart from that in eet there was a further availability of uding Rs. 180 crores of share cap our opinion, the finding of fact reco nd ITAT as to availability of interes t be faulted.
be interest-free funds available to meet its investments and at the sa ad raised a loan it can be presum were from the interest-free funds ava
Supreme Court in East India Ph s case (supra) had the occasion to the Calcutta High Court in Woolcomb
(supra) where a similar issue had a e Court it was argued that it should hat in essence and true character the the profits of the relevant year and n h Navinchandra Gosalia
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A No. 4128/MUM/2025
gh Court in the reproduced as parties. In our ad sought to funds to the e purpose of 31st March, ned with the levant would om that, the o us from the 1999 showed he purpose of ount and the olders funds nt has to be h in the order unal, a clear st-free funds se of the year terms of the f Rs. 398.19
pital. In this orded by CIT st-free funds an assessee ame time the med that the ailable. In our harmaceutical consider the bers of India risen. Before d have been e taxes were not out of the overdraft acc circumstance deductions.
considerable had not be answered. I case (supra conclusion th tax liability account of t presumed th year and not business. It sufficient ma before the H there are fu and/or loan investments or available sufficient to presumption by the CIT (A 5.1 We further note expenses under Rule the Tribunal in the c that while working value of investment has yielded exempted
Hon’ble Bombay Hig
Power Ltd. (supra) an Vireet Investment Pv this matter back t computing the disall
Alpesh
ITA count for the running of the business es the appellant was entitled to The Supreme Court noted that the a e force, but considering the fact that th een advanced earlier it did not re
It then noted that in Woolcombers of a) the Calcutta High Court had c hat the profits were sufficient to meet and the profits were deposited in t the assessee and in such a case hat the taxes were paid out of the p t out of the overdraft account for the ru noted that to raise the presumption aterial and the assessee had urged th
High Court. The principle therefore wou unds available both interest-free an ns taken, then a presumption woul would be out of the interest-free fun with the company, if the interest-free o meet the investments. In this n is established considering the finding
Appeals) and ITAT.”
e that as far as disallowance o e 8D(2)(iii) is concerned the s case of Vireet Investment Pvt. L out disallowance under Rule should be restricted to the inv d income. In view of ratio of the gh Court in the case of Relia nd decision of the Special Benc vt. Ltd (supra), we feel it approp o the file of the Ld. Assess owance under Rule 8D in the l h Navinchandra Gosalia
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A No. 4128/MUM/2025
and in these o claim the rgument had he contention equire to be f India Ltd.'s come to the the advance the overdraft it should be profits of the unning of the n, there was he contention uld be that if nd overdraft ld arise that nd generated e funds were s case this g of fact both f administrative pecial Bench of Ltd. (supra) held
8D the average vestment which e decision of the ance Utilities &
ch in the case of priate to restore sing Officer for light of the ratio of the decisions cited assessee is according
6. In ground No disallowance of Rs.5, of the claim of dedu
Ld. Counsel for the a from other sources’ t to Rs.23,02,500/-
Rs.19,10,270/- resul mainly include comm income of Rs.13,58,3
expenses of Rs.19,1
charges (Rs.20,000) charges (Rs.2013/-),
(Rs.19,303/-), intere
(Rs.20,708/-) and te
Assessing Officer as expenses were incur earning of such incom he particularly aske
Rs.15,82,506/- as to earning interest incom but no co-relation b provided to the Asses
Alpesh
ITA d above. The ground No. 1 of th gly allowed for statistical purpos o. 2, the assessee is aggri
,55,895/- u/s 57(iii) of the Act f ction against the other income assessee referred that under th the assessee had shown the rec and against which claimed lting into income of Rs.3,92,23
mission income of Rs.9,34,800
375/- against which the assess
0,270/- which comprises of a , convenience expenses (Rs.9
depreciation (Rs.1,32,420/-), est on loan (Rs.15,82,506/-, elephone expenses (Rs.38,938/
sked the assessee to justify rred wholly and exclusively for me under the head ‘income from ed about the interest on loan o whether same was incurred for me under the head ‘income from between interest paid and inter ssing Officer by the assessee an h Navinchandra Gosalia
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A No. 4128/MUM/2025
he appeal of the ses.
eved with the for disallowance
. Before us, the he head ‘income ceipt amounting d expenses of 0/-. The receipt
0/- and interest see has claimed accounts writing
92,382/-) Bank professional fee car insurance
-) . Though the whether those the purpose of m other sources’, n amounting to r the purpose of m other sources’
rest earned was nd therefore, the Assessing Officer ma extent of Rs.5,51,895
submitted that asses whom loan were take were applied as to w any other business submitted that he w receipt shown under of facts and circum substantial justice, opportunity to the incurred. Accordingly dispute is set aside
Officer for deciding ground No. 2 of the a statistical purposes.
7. In the result, statistical purposes.
Order pronoun (SANDEEP SING
JUDICIAL M
Mumbai;
Dated: 31/07/2025
Rahul Sharma, Sr. P.S.
Alpesh
ITA ade disallowance out of entire e
5/-. Before us, the Ld. Counsel ssee is willing to file detail of t en and interest was paid and wh whether for earning the interes or investment purpose. The will co-relate the expenses incur r the head ‘income from other s mstances of the case and in we feel it appropriate to pro assessee to justify claim of y the order of the Ld. CIT(A) o and matter is restored back to afresh in view of our directio appeal of the assessee is accordi the appeal of the assessee ced in the open Court on 31/0 GH KARHAIL)
(OM PRAK
MEMBER
ACCOUNTA h Navinchandra Gosalia
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A No. 4128/MUM/2025
expenses to the for the assessee the parties from here those loans st income or for e assessee also rred against the sources’. In view the interest of ovide one more f the expenses on the issue in o the Assessing on above. The ingly allowed for is allowed for 07/2025. d/-
KASH KANT)
ANT MEMBER
Copy of the Order forward
1. The Appellant
2. The Respondent.
3. CIT
4. DR, ITAT, Mumbai
5. Guard file.
////
Alpesh
ITA ded to :
BY ORDER
(Assistant Re
ITAT, Mu h Navinchandra Gosalia
9
A No. 4128/MUM/2025
R, gistrar) umbai