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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: HON’BLE SHRI V. DURGA RAO & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2012-13 arises out of the order of learned Commissioner of Income Tax (Appeals)-11, Chennai [CIT(A)] dated 15-02-2019 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s.143(3) r.w.s. 254 of the Act on 17-12-2018. This is a second round of appeal since the matter, in the first round, was remitted back by the Tribunal vide order dated 05-12-2017 to the file of Ld. AO for fresh 2 - adjudication. The sole subject matter of the appeal is disallowance u/s 14A read with Rule 8D.
The Ld. AR submitted that own funds far exceed the investments made by the assessee and all the investments were made in earlier years. Therefore, interest disallowance would not be justified. The Ld. AR also submitted that indirect expense disallowance may be computed by considering only those investments which have actually yielded any exempt income during the year. The Ld. Sr. DR controverted the arguments of Ld. AR. Having heard rival submissions, the appeal is disposed-off as under.
Upon perusal of assessment order, it could be seen that Ld. AO has computed aggregate disallowance of Rs.92.42 Lacs u/r 8D(2) which include interest disallowance u/r 8D(2)(ii) for Rs.65.71 Lacs and indirect expense disallowance u/r 8D(2)(iii) for Rs.26.70 Lacs. The Ld. CIT(A) has confirmed the same against which the assessee is in further appeal before us.
Upon perusal of assessment order, it could be seen that opening value of investments as well as closing value of investments as taken by Ld. AO to compute the disallowance is same which would show that no fresh investment has been made by the assessee during this year. The perusal of financial statements for this year, as placed, on record, would show that own funds in the shape of share capital and Reserves far exceed the investments made by the assessee and therefore, a presumption would arise in assessee’s’ favor that the investments were sourced out of own funds since no nexus of interest-bearing funds vis- à-vis investments made by the assessee has been established by Ld. AO. Therefore, in our considered opinion, interest disallowance is not 3 - justified. The indirect disallowance may be computed by Ld. AO u/r 8D(2)(iii) by considering only those investments which have actually yielded exempt income during the year. The assessee is directed to provide the requisite details.
The appeal stands partly allowed. Order pronounced on 29th November, 2022.