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Income Tax Appellate Tribunal, MUMBAI BENCH “C” MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI M. BALAGANESH
ORDER PER M. BALAGANESH, A.M. These appeals of the assessee arise out of the order passed by the Ld. Commissioner of Income Tax (Appeals)-39, Mumbai [hereinafter referred to as ‘Ld. CIT(A)’] dated 30.05.2019 for assessment year 2011-12 and 20.05.2019 for assessment year 2012-13 against the order of assessment framed by the Assessing Officer (hereinafter referred to as ‘AO’) on 28.03.2014 and 18.03.2014 for assessment years 2011-12 and 2012-13 respectively u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’).
Paresh N. Bhagat 2 & 5392/M/2019
The only effective issue to be decided in this appeal is with regard to disallowance made u/s 14A of the Act r.w.r. 8D(2) of the Income Tax Rules, 1962 (hereafter referred to as ‘Rules’). 2.1 With the consent of both the parties, the appeal for the assessment year 2011-12 is taken as the lead case and the decision rendered thereon would apply with equal force for assessment year 2012-13 also in view of identical facts except with variance in figures.
We have heard the rival submissions and perused the materials available on record. We find that assessee for assessment year 2011-12 had derived dividend income of Rs.13,83,891/- and claimed the same as exempt. No disallowance of expenses was made suo moto by the assessee u/s 14A of the Act. The Ld. AO proceeded to compute the disallowance u/s 14A of the Act in terms of Rule 8D(2)(ii) of Rs.43,02,748/- and u/s 8D(2)(iii) of Rs.21,38,332/-. The Ld. CIT(A) upheld disallowance made by the Ld. AO, but however, restricted the disallowance to the extent of dividend income of Rs.13,83,891/-. Aggrieved by this order, the assessee is in appeal before us. 3.1. We find that assessee is an individual and from the perusal of the balance sheet of the assessee, we find that assessee is having capital account (own funds) to the tune of Rs.88.50 crores which is much more than the investments made by the assessee and hence, it could be safely presumed that the investments were made with own funds and not with borrowed funds. By placing reliance, in this regard on the decision of Hon’ble Jurisdictional High Court in the case of HDFC Bank Ltd. in 366 ITR 505, we direct the Ld. AO to delete the disallowance of interest under Rule 8D(2)(ii) was of the Rules.
Paresh N. Bhagat 3 & 5392/M/2019 3.2. With regard to the disallowance of administrative expenses under Rule 8D(2)(iii) of the Rules, we hereby direct the Ld. AO to consider only dividend bearing investments for the purpose of working out the disallowance in the light of decision of Special Bench of Delhi Tribunal in the case of Vireet Investments reported in 165 ITD 27. We further direct the Ld. AO that the said disallowance in any case shall not exceed the exempt income and also shall not exceed the total expenses claimed as deduction by the assessee. Accordingly, the grounds raised by the assessee are partly allowed for statistical purposes in view of the abovementioned directions.