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Income Tax Appellate Tribunal, KOLKATA ‘B’ BENCH, KOLKATA
Before: Shri P.M. Jagtap, Vice- & Shri Satbeer Singh Godara
Per Shri P.M. Jagtap, Vice-President:
This appeal filed by the assessee is directed against the order of ld. Commissioner of Income Tax (Appeals)-16, Kolkata dated 25th April, 2019 and the grounds raised by the assessee therein read as under:- “(1) That on the facts and in the circumstances of the case, the AO was wholly wrong and unjustified in making disallowance of Rs.21,74,843/- u/s 14A read with Rule 8D(2)(ii) without appreciating the submission made and in view of the facts and in the circumstances the Ld. CIT(A) had grossly erred in confirming the said addition of Rs.21,74,843/- made by the Aa by wrongly and illegally invoking the provisions of sec. 14A read with Rule 8D(2)(ii) without appreciating the submission preferred before the AO and the Ld. CIT(A) that -
a) The appellant-company is a NFBC company. b) The appellant had a net interest income of Rs.26,79,987/-. (Interest received Rs.3,70,23,700/- and interest payment Rs.3,43,43,713/-).
Assessment Year: 2013-2014 Salarpuria Investment Pvt. Limited c) The Share Capital and Reserves & Surplus of the appellant was Rs. 28.53 crores which was far in excess of investments in shares which was at Rs.5.10 crores only. d) Investment in shares included stock-in-trade and provisions of sec. 14A were not applicable in respect of stock-in-trade. e) In any case, without prejudice and even otherwise, the disallowance u/s 14A read with Rule 8D(2)(ii) could only be investment in respect of those shares on which exempt dividend was received not in respect of other shares.
Accordingly, it is prayed that such addition of Rs.21,74,843/- may kindly be deleted.
(2) That on the facts and in the circumstances of the case, the AO was wholly wrong and unjustified in not allowing full and proper credit for TDS of Rs.37,13,383/- when all the evidences together with Form 26AS were produced before him and in view of the facts and in the circumstances the Ld. CIT(A) had grossly erred in not allowing full and proper credit of TDS of Rs.37,13,783/-, himself instead of directing the AO to verify and allow when full details of such TDS were furnished before him also.
(3) That on the facts and in the circumstances of the case, the AO was wholly wrong and unjustified in not allowing full and proper credit for advance tax payment of Rs.20,00,000/- when all evidences in respect of such payment had been produced before him and in view of the facts and in the circumstances the Ld. CIT(A) had grossly erred in not allowing full credit of advance tax of Rs.20,00,000/-, himself instead of directing the AO to verify and allow when full details and reminders of such payment of advance tax was furnished before him also.
(4) That on the facts and in the circumstances of the case, the AO was wholly wrong and unjustified in not allowing full and proper credit in respect of MAT payment u/s 115JAA even when all the evidences in this regard were produced before him and in view of the facts and in the circumstances the Ld. CIT(A) was wholly wrong and unjustified in not straight away directing to allow such credit and in view of the facts and in the circumstances it may kindly be held accordingly”.
We have heard the arguments of both the sides and also perused the relevant material available on record. At the time of hearing before us, Assessment Year: 2013-2014 Salarpuria Investment Pvt. Limited the ld. Counsel for the assessee has not pressed Grounds No. 2, 3 & 4 and the same are accordingly dismissed as not pressed.
As regards the issue involved in Ground No. 1 relating to the disallowance of Rs.21,74,843/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of interest under section 14A read with Rule 8D(2)(ii), the ld. Counsel for the assessee has invited our attention to the relevant portion of the annual accounts of the assessee-company placed at page no. 35 to show that interest earned by the assessee-company during the year under consideration at Rs.3,70,23,700/- was more than the interest paid amounting to Rs.3,43,43,713/- and the net interest of Rs.26,79,987/- earned by the assessee was shown as its income. By relying on the judgment of the Hon’ble Supreme Court in the case of ACG Associated Capsules Pvt. Limited –vs.- CIT (343 ITR 89), he has contended that the netting of interest should be done and there being no interest expenditure claimed by the assessee after netting, the question of disallowance on account of interest under section 14A read with Rule 8D(2)(ii) would not arise. It is observed that this contention raised by the ld. Counsel for the assessee is duly supported by the judgment of the Hon’ble Gujarat High Court dated 31.08.2017 in the case of Principal CIT vs Nirma Credit & Capital Pvt. Ltd. (Tax Appeal Nos. 409 and 514 of 2017), wherein it was held that for the purpose of applying Rule 8D(2)(ii) of the Income Tax Rules, 1962 prior to amendment with effect from 02.06.2016, what would be considered as amount of expenditure by way of interest would be the interest paid by the assessee on the borrowings minus the taxable income earned during the financial year. The benefit of netting of interest thus has been allowed by the Hon’ble Gujarat High Court while computing the disallowance made under section 14A as per Rule 8D and keeping in view the same, we are inclined to accept the contention of the ld. Counsel for the assessee that the interest earned by the assessee during the year under consideration being more than the interest paid, no disallowance on account of interest can be made under section 14A read with Rule 8D. We accordingly delete the disallowance made by the Assessing Officer and confirmed by the Assessment Year: 2013-2014 Salarpuria Investment Pvt. Limited ld. CIT(Appeals) on account of interest under section 14A read with Rule 8D and allow Ground No. 1 of the assessee’s appeal.
In the result, the appeal of the assessee is partly allowed. Order pronounced in the open Court on January 08, 2020.