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Income Tax Appellate Tribunal, ‘B‘ BENCH
आदेश / O R D E R PER M. BALAGANESH (A.M): This appeal in A.Y.2009-10 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-4, Mumbai in appeal No.CIT(A)-4/e-file-276/ACIT 2(1)(1)/2018-19 dated 26/06/2019 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) r.w.s. 254 of the Income Tax Act, 1961 (hereinafter referred to as Act) by the ld. Asst. Commissioner of Income Tax, Circle 2(1)(1), Mumbai (hereinafter referred to as ld. AO).
The ground No.1 raised by the Revenue is challenging the action of the ld. CIT(A) in deleting the interest disallowance made u/s.14A of the Act r.w. Rule 8D(2)(ii) of the Rules on the ground that the assessee bank is having sufficient interest free funds to make investments.
We have heard rival submissions and perused the materials available on record. We find that assessee had earned exempt income of Rs.58,43,00,883/- by way of interest on tax free bonds, dividends on shares and interest which is exempt u/s.10(15)(iv)(c ) & (f) of the Act. The assessee also holds certain securities as stock in trade. The assessee pleaded that its own funds available by way of share capital was Rs.365.52 Crores, reserves and surplus of Rs.12514.19 Crores and demand deposits of Rs.14451.22 Crores on which no interest was paid. The assessee pleaded that these interest free funds were sufficient enough to explain the investments made by the assessee which had yielded exempt income. Accordingly, the assessee placed reliance on the decisions of the Hon’ble Jurisdictional High Court in the case of HDFC Bank Limited 366 ITR 505 and 383 ITR 529 to drive home the point that interest free funds available with the assessee were sufficient enough to cover the investments that had yielded exempt income.
3.1. We find that the ld. AO disregarded the aforesaid contentions of the assessee and proceeded to disallow Rs.85,90,80,262/- u/s.14A of the Act r.w.Rule 8D(2) of the Rules. We find that assessee had voluntarily disallowed the sum of Rs.7,94,39,436/- under Rule 8D(2) (iii) of the Rules considering the investments which had yielded exempt income. We find that the ld. CIT(A) on appreciating the fact that assessee has flooded with sufficient own and interest free funds in its kitty which would sufficiently explain the investments made by it which had actually yielded exempt income and hence, it could be safely inferred that no borrowed funds could have been utilised for the same. Accordingly, by placing reliance on the decision of Jurisdictional High Court in assessee’s own case and various Tribunal decisions of Hon’ble Jurisdictional High Court which has been followed by the ld. CIT(A) while granting relief to the assessee, we find no infirmity in the said order of the ld. CIT(A). Accordingly, the ground No.1 raised by the Revenue is dismissed.
The ground No.2 raised by the Revenue is challenging the action of the ld. CIT(A) wherein he had directed the ld. AO to exclude the investments that were held as ‘stock in trade’ while computing disallowance u/s.14A of the Act r.w.Rule 8D(2) of the Rules. We find that the ld. CIT(A) had directed the ld. AO to ignore the investment in shares and securities that were held as ‘stock in trade’ for the purpose of computing disallowance u/s. 14A of the Act r.w.Rule 8D(2) of the Rules, by placing reliance on the decision of this Tribunal in case of DCIT vs. India Advantage Securities Ltd., in dated 14/09/2012 ; the decision of Hon’ble Kerala High Court in the case of CIT vs. Smt. Leena Ramachandran reported in 339 ITR 296 and also on the decision of the Hon’ble Jurisdictional High Court in the case of CIT vs. India Advantage Securities Ltd., in ITA No.1131 of 2013 dated 17/03/2015. We find that this issue was the subject matter of adjudication by this Tribunal in the case of Central Bank of India vs. DCIT in ITA No.3739/Mum/2018 & 3763/Mum/2018 for A.Y.2012-13 dated 29/01/2020, which is authored by the undersigned, wherein it was held that the Hon’ble Apex Court in the case of Maxopp Investment Ltd., reported in 402 ITR 640 had categorically upheld the findings recorded by the Hon’ble Punjab and Haryana High Court in the case of State Bank of Patiala reported in 78 Taxmann.com 3 (P & H) with regard to non- applicability of provisions of Section 14A of the Act in respect of investments held as stock in trade in respect of banks. It was also held by this Tribunal that the Hon’ble Punjab and Haryana High Court in above mentioned case had further placed reliance on the CBDT Circular No.18 /2015 dated 02/11/2015. Hence, by respectfully following the said decision, we hold that there was absolutely no error in the action of the ld. CIT(A) in holding that provisions of Section 14A of the Act could not be made applicable in respect of investments in shares held as ‘stock in trade’ in the case of assessee bank. Accordingly, the ground No.2 raised by the Revenue is dismissed.
The ground Nos. 3 & 4 is with regard to grant of interest of refund u/s.244A of the Act and the method of computation of interest u/s.244A thereon.
5.1. We have heard rival submissions and perused the materials available on record. We find that the issue has already been the subject matter of adjudication by this Tribunal in assessee’s own case for A.Y.1995-96 in and 2565/Mum/2017 dated 20/12/2018, authored by the undersigned, which has been relied upon by the ld. CIT(A) while granting relief to the assessee. The operative portion of the said order is reproduced together with the facts by the ld. CIT(A) in his order from pages 11 to 21 thereon. Hence, the same is not reproduced herein for the sake of brevity. Respectfully following the decision of this Tribunal in assessee’s own case for A.Y.1995-96 referred to supra, we find no infirmity in the order of the ld. CIT(A) in this regard. Accordingly, the ground Nos. 3 & 4 raised by the Revenue are dismissed.
In the result, appeal of the Revenue is dismissed.
Order pronounced on 08/03/2021 by way of proper mentioning in the notice board.