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Income Tax Appellate Tribunal, MUMBAI BENCH “F”, MUMBAI
Before: Shri Pawan Singh (JM) & Shri S Rifaur Rahman (AM)
O R D E R PER PAWAN SINGH, JM : 1. These two appeal filed by assessee are directed against the separate orders of CIT(A)-10, Mumbai both dated 14-06-2018 for assessment years 2013-14 & 2014-15. In both the appeals, the assessee has raised identical grounds of appeal. Facts in both the appeals are identical except the variation of certain figures. Accordingly, both the appeals were clubbed, heard and are decided by this consolidated order. In appeal for AY 2013- 14, the assessee has raised the following ground of appeal:- “The Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in disallowing a sum of Rs. 12,70,0897- u/s. 14A of Income Tax Act, 1961 by invoking the rule 8D of Income Tax Rules, 1962, without considering the facts and circumstances of the case.”
2 ITA 5387 & 5388/Mum/2018 JSW Cement
The brief facts of the case are that assessee is a corporate entity engaged in the business of manufacturing of ground granulated blast furnace slag (CGBS), Portland slag cement (PSC) & ordinary Portland cement (OPC), filed its return of income declaring loss of Rs.425 crores. The case was selected for scrutiny and assessment was completed u/s 143(3) on 31-03- 2016. During the assessment, the assessee has shown exempt income in the form of dividend of Rs.7.79 lakhs. The assessee has shown suo moto disallowance of Rs.1.23 lakhs being expenditure incurred in relation to exempt income. The AO noted that assessee has not debited the interest expenditure while computing the disallowance u/s 14A r.w.s. 8D(2)(ii).
On show cause notice, the assessee filed its submission, which has been recorded by AO at para 4.1 of the assessment order. The assessee, in his reply stated that the assessee owned interest free funds for making investments, though the assessee has borrowed funds, a presumption can be made that advance for non-business purpose, have been made out of own funds and that borrowed funds have not been used for the purpose of investment. The assessee relied upon the decision of Hon’ble jurisdictional High Court in CIT vs Reliance Utilities & Power Pvt Ltd 313 ITR 340 (Bom) and CIT vs HDFC Bank Ltd 366 ITR 505 (Bom).
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The reply of the assessee was not accepted by AO. The AO invoked the provisions of Rule 8D(2)(ii) and made disallowance of Rs.12,70,089/- on account of interest expenditure. The AO, after giving set off of suo moto disallowance, made the addition accordingly. On appeal before the CIT(A), the action of AO was upheld. Further aggrieved by the order of CIT(A), the assessee has filed present appeal before Tribunal.
We have heard the learned authorised representative (ld. AR) for the assessee and the learned departmental representative (Ld. DR) for the revenue and perused the material available on record. The Ld.AR of the assessee submits that the assessee has raised very limited ground of appeal that the disallowance made by AO and confirmed by Ld.CIT(A) u/r 8D(2)(ii) is made by not following the decision of jurisdictional High Court in CIT Vs HDFC Bank Ltd (supra) and CIT vs Reliance Utilities & Power Pvt Ltd (supra). The Ld.AR submits that despite bringing the fact in the notice of AO that the assessee’s own funds were more than the investment made by assessee for earning the exempt income the lower authority made disallowances under Rule8D(2)(ii), which is not warranted in the present appeal.
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On the other hand, the Ld. DR for the revenue supported the order of lower authorities. The Ld. DR submits that Ld. CIT(A) has distinguished the case laws relied upon by the assessee.
We have considered the submission of both the parties and perused the material available on record. We have noted that there is very short point / issue for our adjudication. We have noted that before the Ld.CIT(A), the assessee before the lower authorities demonstrated that the reserves and surplus fund of the assessee was more than the investment made in the shares of JSW Energy on which assessee earned exempt income.
Despite the fact that the assessee relied upon the binding decision of CIT vs HDFC Bank Ltd (supra) and CIT Vs Reliance Utilities & Power Pvt Ltd (supra), the AO made disallowance u/ 8D(2)(ii). Considering the binding decision of Hon’ble jurisdictional High Court, we are in agreement with the submission of Ld.AR of the assessee that no disallowance u/r 8D(2)(ii) is warranted when the assessee has own interest free funds more than the investment. Accordingly, we direct the AO to verify the fact, and if the reserves and surplus interest free funds of the assessee were more than the investment then, no disallowance u/r 8D(2)(ii) be made.
In the result, appeal of the assessee is treated as allowed.
5 ITA 5387 & 5388/Mum/2018 JSW Cement ITA No.5388/Mum/2018 (AY 2014-15)
The assessee has raised identical ground of appeal in this appeal as raised
in appeal for AY 2013-14. The facts of the case for the year under consideration are also identical. Therefore, considering the principle of consistency, the ground of appeal of the assessee is allowed with similar direction.
In the result, appeal of the assessee is treated as allowed.
As a result, both the appeal filed by the assessee is allowed, for statistical purpose.
Order pronounced in the open court on 12-12-2019.