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Income Tax Appellate Tribunal, DELHI BENCH ‘B’, NEW DELHI
Before: SH.SUDHANSHU SRIVASTAVA & SH. PRASHANT MAHARISHI
assessed vide order dated 24.03.2014 u/s 153A of the Act at Rs. 64534181/-. The above disallowance was challenged before the ld CIT(A) who confirmed the same. Therefore, the assessee is in appeal before us.
The ld AR submitted that the assessee has received dividend income during the year of Rs. 131380/- from Union Bank and Punjab National Bank Ltd only. He submitted that the total investment made by the assessee in these two companies is merely Rs. 295000/-. He submitted that at the most average value of investment is only Rs. 295000/- only. With respect to the interest expenditure, he submitted that against the Investment of Rs. 12.72 crores the interest free funds are to the tune of Rs. 44 crores and therefore, there cannot be any disallowance on account of interest. Hence, disallowance made by the AO and ld CIT(A) is erroneous.
The ld DR vehemently supported the order of the lower authorities.
We have carefully considered the rival contentions and also perused the orders of the lower authorities. In the present case the assessee has interest free funds in the form of share capital and reserve of Rs. 44.87 crores which exceeds the investment made by the assessee for earning exempt income by three times, naturally there cannot be any disallowance of interest under Rule 8D. Hence, the disallowance of Rs. 1104372/- made on account of interest under Rule 8D being indirectly attributable to the exempt income deserves to be deleted. Further, Rs. 6365326/- is disallowed being 0.5% of average value of investment. For this sum only 0.5% of investment which yielded tax exempt income is to be considered. Accordingly the ld AO directed to retain the addition only 0.5% of Rs. 295000/-. In the result appeal of the assessee for Assessment Year 2010-11 is partly allowed.
Coming to the appeal of the assessee for Assessment Year 2011-12, arguments of both the parties are same. In this year, assessee has earned dividend income of Rs. 29928/- only. The share capital and free reserve is Rs. 50.41 crores against the investment of Rs. 8.73 crores. The total investment in the shares from which dividend is received is also Rs. 2.95 lakhs. Therefore, for the reason given by us for Assessment Year 2010-11 we direct the ld AO to delete the