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Income Tax Appellate Tribunal, ‘D’ BENCH, CHENNAI
Before: SHRI MAHAVIR SINGHAND SHRI MANOJ KUMAR AGGARWAL
आयकरअपीलसं./ITA Nos.: 1550, 1551 & 1552/CHNY/2018 िनधा�रण वष�/Assessment Years: 2009-10, 2011-12 & 2014-15 Chakiat Agencies Pvt. Ltd., The ACIT / DCIT, 40, Rajaji Salai, vs. Company Circle I(3) / 3rd Floor, P.B.No.1880, Company Circle I(2), Chennai – 600 001. Chennai. PAN: AABCC 6281F (अपीलाथ�/Appellant) (��यथ�/Respondent) अपीलाथ� क� ओर से/Appellant by : Shri P.M. Veeramani, CA ��यथ� क� ओर से/Respondent by : Shri D. Hema Bhupal, JCIT सुनवाई क� तार�ख/Date of Hearing : 18.10.2022 घोषणा क� तार�ख/Date of Pronouncement : 21.10.2022 आदेश /O R D E R PER MAHAVIR SINGH, VICE PRESIDENT: These appeals by the assessee are arising out of common order of Commissioner of Income Tax (Appeals)-1, Chennai in 438 & 264/CIT(A)-1/2016-17 dated 28.03.2018. The assessments were framed by the ACIT / DCIT, Company Circle I(3) / I(2), Chennai for the assessment years 2009- 10, 2011-12 & 2014-15 u/s. 143(3) of the Income Tax Act, 1961
The only common issue in these three appeals of assessee is as regards to the order of CIT(A) confirming the disallowance of expenses relatable to exempt income by invoking the provisions of section 14A r.w.rule 8D of the Income Tax Rules, 1962 being interest expenses and administrative expenses. For this assessee has raised identically worded grounds which are argumentative and exhaustive and hence, need not be reproduced.
We have heard rival contentions and gone through facts and circumstances of the case. We noted that the AO in all the three assessment years i.e., 2009-10, 2011-12 & 2014-15 disallowed interest expenses by invoking the provisions of section 14A r.w.rule 8D(2)(ii) of the Rules i.e., interest expenses amounting to Rs.12,89,237/- in assessment year 2009-10, Rs.13,57,967/- in assessment year 2011-12 and Rs.25,63,382/- in assessment year 2014-15. The AO has also disallowed administrative expenses i.e., 0.5% of average value of investment under Rule 8D(2)(iii) in assessment year 2011-12 amounting to Rs.3,51,790/- and in assessment year 2014-15 amounting to Rs.7,58,458/- . Aggrieved
3 to 1552/Chny/2018 assessee preferred appeal before CIT(A). The CIT(A) confirmed the disallowance. Aggrieved, assessee in all the three years came in appeal before the Tribunal.
Before us, the only contention of the assessee in regard to disallowance of interest was that the AO has not examined the availability of interest free funds which are more than the investments made in the instruments giving raise to exempt income. The ld.counsel for the assessee drew our attention to page 3 of assessee’s paper-book, wherein statement of funds and investments for these three years are as under:- Statement of own funds and investments for various years Own Funds 31.03.2014 31.03.2011 31.03.2009 Share Capital 3,41,000.00 3,41,000.00 3,41,000.00 Reserves and Surplus 35,49,98,222.48 26,07,86,495.18 20,40,83,421.45 Total 35,53,39,222.48 26,11,27,495.18 20,44,24,421.45 Investments 15,38,81,432.68 14,32,10,905.39 14,34,64,150.05 In view of the above, the ld.counsel stated that once own funds availability is more than the investments made in instruments giving raise to exempt income and in the absence of any finding by the AO that the interest bearing funds are invested in the instruments giving raise to exempt income and no nexus have been proved, presumption will be that the investments is out of own funds, in 4 to 1552/Chny/2018 view of decision of the Hon’ble Bombay High Court in the case of CIT vs. HDFC Ltd., reported in 366 ITR 505. Hence, he requested that the matter can be remanded back to the file of the AO for verification purpose of these funds position and according take a call.
4.1 In regard to disallowance of administrative expenses in two years i.e., assessment year 2011-12 & 2014-15, he only requested that the disallowance can be restricted to the average value of investment which give raise to exempt income only and not the entire investments can be considered for making disallowance. Hence, he requested that direction can be given to the AO to consider only those instruments which give raise to exempt income.
When these were confronted to ld. Senior DR, he agreed that matter can be restored back to the file of the AO.
We noted the above arguments and plea of the assessee is quite reasonable and hence on both the issues, we remit the matter back to the file of the AO. The AO will verify the fund position i.e., own funds available with the assessee and investments made in instruments giving raise to exempt income and accordingly, he will
5 to 1552/Chny/2018 decide. As regards to disallowance of administrative expenses in assessment year 2011-12 & 2014-15, he will only consider the investments which give raise to exempt income for computing average value of investments. In term of the above, these three appeals are allowed for statistical purposes.
In the result, the appeals filed by the assessee in 1551 & 1552/CHNY/2018 are allowed for statistical purposes.
Order pronounced in the open court on 21st October, 2022 at Chennai.