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Income Tax Appellate Tribunal, ‘B‘ BENCH
Before: SHRI M.BALAGANESH, AM & SHRI RAVISH SOOD, JM
आदेश / O R D E R
PER M. BALAGANESH (A.M): These appeals in 5668/Mum/2019 & 5669/Mum/2019 for A.Y.2012-13, 2013-14 & 2014-15 arise out of the order by the ld. Commissioner of Income Tax (Appeals)-10, Mumbai in appeal Nos.CIT(A)-10, Mumbai/10857/2015-16, CIT(A)-10, Mumbai/10578/2016-17, CIT(A)-10, Mumbai/11093/2016-17 dated 24/06/2019 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 25/03/2015, 23/03/2016 & 27/12/2016 respectively by the ld. Dy. Commissioner of Income Tax-5(1)(1) (hereinafter referred to as ld. AO).
Since identical issues are involved in all these appeals, they are taken up together and disposed of by this common order for the sake of convenience.
The only identical issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in deleting the disallowance u/s.14A of the Act r.w.r 8D(2)(ii) of the Rules in the facts and circumstances of the instant case.
2.1. None appeared on behalf of the assessee.
We have heard the ld. DR and perused the materials available on record. We find that assessee is a private limited company engaged in the business of trading in shares and securities and had filed its return of income for the A.Y.2012-13 on 28/09/2012 declaring total income of Rs. Nil. We find that assessee had earned dividend income of Rs.3,25,56,877/- and claimed the same as exempt in the return of income. We find that assessee had disallowed a sum of Rs.35,48,664/- on its own u/s.14A of the Act in the return of income. The ld. AO however, resorted to invoke the computation mechanism provided in Rule 8D(2) of the Rules and proceeded to make disallowance as under:-
i) Under Rule 8D(2)(ii) - Rs.4,39,04,585/- ii) Under Rule 8D(2)(iii) - Rs.35,48,664/- ---------------------- Total Rs.4,74,53,249/- Less Disallowance made by the assessee Rs. 35,48,664/- ---------------------- Net disallowance u/s.14A Rs.4,39,04,585/- =========== 3.1. We find that disallowance made under Rule 8D(2)(ii) of the Act amounting to Rs.35,48,664/- is not in dispute before us as the same was voluntarily made by the assessee in the return of income and which was not sought to be withdrawn by the assessee before the lower authorities. We find that the ld. CIT(A) on going through the accounts of the assessee observed that though the assessee had incurred interest expenses of Rs.11,95,93,750/- for the A.Y.2012-13, the ld. CIT(A) had placed reliance on the order by his predecessor in assessee’s own case for A.Y.2011-12 vide order dated 30/11/2015 and proceeded to delete the addition made on account of interest under Rule 8D(2)(ii). We find that the ld. CIT(A) without giving any factual details about the availability of own funds with the assessee, proceeded to delete the disallowance of interest merely by placing reliance on the order passed by his predecessor in assessee’s own case for A.Y.2011-12. Against the said order of the ld. CIT(A) for A.Y.2011-12, the Revenue had preferred an appeal before this Tribunal which was disposed of by this Tribunal in dated 09/10/2018 by holding as under:-
“5. We have gone through the assessment year and the order of CIT(A) and noticed that the CIT(A) has nowhere pointed out that how the interest free funds are available and how much. Secondly, no details are discussed, hence, we set aside the order of CIT(A) to the extent deleting the disallowance of interest under Rule 8D(2)(ii) by CIT(A). As regards to the deletion of addition under Rule 8D(2)(i) & (iii) are concerned, the assessee itself has made disallowance of ₹ 19,15,937/- which will meet the requirement. Hence, this appeal of Revenue is allowed.”
3.2. Respectfully following the aforesaid judicial precedent in assessee’s own case, we deem it fit and appropriate to remand this issue to the file of the ld. AO with the same direction to give a clear finding as regards the availability of own funds with the assessee in order to make investments which had yielded exempt income. If assessee is found to have sufficient interest free funds in its kitty to make investments which had yielded exempt income, then the ratio decidendi of the Hon’ble Jurisdictional High court in the case of HDFC Bank reported in 366 ITR 505 would come into operation and in such scenario, no disallowance of interest need to be made under Rule 8D(2)(ii) of the Rules. The ld. AO is hereby directed to give proper finding with regard to aforementioned facts and decide the issue in accordance with law. Accordingly, the grounds raised by the Revenue for A.Y.2012-13 are allowed for statistical purposes.
3.3. The decision rendered hereinabove for A.Y.2012-13 shall apply mutatis mutandis for A.Y.2013-14 and 2014-15 in view of identical facts except with variance in figures.
In the result, appeals of the Revenue are allowed for statistical purposes.
Order pronounced on 24/03/2021 by way of proper mentioning in the notice board.