ASST. COMMISSIONER OF INCOME-TAX, CIRCLE 2(1), TRICHY STATIONED AT THANJAVUR, THANJAVUR vs. CITY UNION BANK LIMITED, KUMBAKONAM

"35. Ground No.7, challenges the decision of the Id. CIT(A) that interest in respect of recurring deposit cannot be disallowed for non deduction of TDS thereon. The Id. CIT (A) had referred to the relevant provisions of Section 194A of the Act and amendment made by Finance Act, 2015. The decision of the id. CIT(A) is based on proper appreciation of the legal position. Accordingly, we do not find any merits in the ground No.7 raised by the Revenue. Ground No.7 of the Revenue is dismissed."

9. Before concluding, it is to be mentioned Ld.AR in the course of his submissions has sought to support order of CIT(A) on a ground decided against him by referring to Rule 27 of Income Tax (Appellate Tribunal) Rules, 1963. In this context, Ld.AR had relied on judgement of the Hon'ble Delhi High Court in the case of Sanjay Sawhney Vs. PCIT (2020) (5) TMI 441 (Del). The learned AR submitted the reopening of assessment is invalid, since reasons recorded is on borrowed satisfaction. In this context, Ld. AR relied on two judgements of the Hon'ble Bombay High Court in the cases of Gandhibag Sahakari Bank Ltd. Vs. DCIT (2023) 9 TMI 1344 (Bom) and Sociedade De Fomento Industrial Pvt. Ltd. & Shantilal Khushal Das & Bros P. Ltd Vs. ACIT (2024) 1 TMI 1080 (Bom) in support of his submissions that reopening of assessment is bad in law. However, since we have decided the issue on merits in favour of the assessee, legal contention of the Ld.AR is not adjudicated and is left open.

8. At the outset, Ld.AR for the assessee has relied upon the co- ordinate Bench decision in assessee’s own case in & 1419/Chny/2019 dated 11.03.2024. The learned CIT DR did not dispute the averments of the learned counsel for the assessee and relied on the order of the AO.

“16.3 We have heard both the parties, perused materials available on record and gone through orders of the authorities below. This issue is squarely covered in favour of the assessee by the decision of coordinate bench of ITAT, Chennai benches in appellant’s own case for assessment years 2012-13 & 2013- 14, where the Tribunal under identical set of facts held as under: “27. Ground No.1 challenges the decision of the ld. CIT(A) in deleting the addition made u/s.14A of the Act on the ground that investments held by the assessee company is stock in trade and therefore resort to provisions u/s.14A of the Act cannot be made. The Assessing Officer made a disallowance of I2,82,57,685/- u/s.14A r.w.r. 8D. On appeal before the ld. CIT(A), the ld. CIT(A) held that the provisions of Section 14A of the Act cannot be applied in case of exempt income earned from investment held in stock in trade. Reasoning of the ld. CIT(A) has been overturned by the Hon’ble Supreme Court in the case of Maxopp Investment Ltd vs. CIT, (2018) 402 ITR 640. Therefore contention of the assessee that provisions of Section 14A of the Act cannot be invoked, when the securities are held as stock-in-trade, cannot be accepted. As regards to other limb of the argument of the assessee that in the absences of any finding by the Assessing Officer as to how the contention of the assessee that no expenditure was incurred is incorrect no disallowance should be made. We find from the assessment order that the assessee bank itself has offered a sum of I2,19,751/- under the provisions of Section 14A of the Act. From the perusal of the order of the Assessing Officer, it is clear that the Assessing Officer had not assigned any reason whatsoever as to how the claim of the assessee is incorrect. In the similar facts, the Hon’ble Supreme Court in the case of Maxopp Investment Ltd. vs. CIT, 402 ITR 640 held that in the absence of the finding of the Assessing Officer resort to provisions of Section 14A of the Act r.w.r 8D of the Rules cannot be made. This decision was followed by the Co- ordinate Bench of the Tribunal in the case of Karur Vysya Bank (supra) cited by holding as under:- “Ground No. 8 challenges the addition of I3,88,882/- invoking the provision of Section 14A of the Act. It is the contention of the appellant that the appellant had not incurred any expenditure to earn exempt income. The Assessing Officer had not given any findings as to how the claim of the assessee- bank that no expenditure was incurred to earn the exempt income was incorrect. In the absence of this finding resort to the provisions of rule 8D of the Income Tax Rules cannot be made as held by the Hon’ble Supreme Court in the case of Maxopp Investment Ltd vs. CIT, (2018) 402 ITR 640. Therefore this ground of appeal filed by the assessee is allowed. Accordingly, this ground of appeal stands allowed in favour of the assessee’’. Similar view was taken up by the Hon’ble Delhi High Court in the case of CIT vs. Taikisha Engineering India Ltd, 370 ITR 338 and PCIT vs. Moonstar Securities Trading and Finance Co. (P) Ltd, 105 taxmann.com 274. The Hon’ble Delhi High Court had firmly held that mere rejection of the explanation of the assessee per se cannot be accepted. This decision of Delhi High Court in the case of Moonstar Securities Trading and Finance Co. (P) Ltd, was affirmed by the Hon'ble Supreme Court in the case of dismissal of SLP in PCIT vs. Moonstar Securities Trading and Finance Co. (P) Ltd, 105 taxmann.com 275. In the light of the above legal positions, we are of the considered opinion that even in the present case no reason was assigned by the Assessing Officer for rejecting the explanation of the assessee. In the circumstances, ratio of the decision of Hon'ble Supreme Court in the case of Maxopp Investment Ltd (supra) is squarely applicable. We direct the Assessing Officer to delete the addition made u/s.14A of the Act. Thus, ground No.1 raised by the Revenue is dismissed.”

10. Respectfully following the decision of the co-ordinate Bench decision of the Tribunal in assessee’s own case referred supra, we are inclined to uphold the finding of the Ld.CIT(A) and reject the grounds taken by the Revenue.