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Income Tax Appellate Tribunal, DELHI BENCH: “A”, NEW DELHI
Before: SHRI RAJ PAL YADAV & SHRI N.K. BILLAIYA
This appeal by the Assessee is preferred against the order of the Ld.
CIT(A)-30, New Delhi, dated 22.04.2015 pertaining to the A.Y. 2010-11.
The sum and substance of the grievance of the assessee is that the Ld. CIT(A) in confirming the addition of Rs. 14,65,290/- made u/s 14A of the Act.
The assessee is engaged in the business of manufacturing, trading and investment. During the course of scrutiny assessment proceedings, the AO noticed that the assessee has derived dividend income and long term capital gain which were claimed as exempt from taxation. The AO noticed that the assessee has not disallowed any expenditure u/s 14A of the Act read with Rule 8D of the Income Tax Rules. The AO computed the disallowance at Rs. 14,65,290/-.
The assessee carried the matter before the Ld. CIT(A) but without success. Before us, the Counsel for the assessee stated that no expenditure has been incurred for earning the exempt income, moreover, the long term capital gain assumed by the lower authorities is in fact a long term capital loss of Rs. 97,79,300/-. It is the say of the Ld. Counsel that the disallowance u/s 14A of the Act is un-warranted of the fact of the case. Per contra, the Ld. DR strongly supported the findings of the AO.
We have carefully considered the orders of the authorities below. It is true that the long term capital gain taken by the lower authorities is in fact long term capital loss. However, we find that the assessee has claimed dividend income as exempt u/s 10 amounting to Rs. 19,15,695/- though the Assessing Officer has taken the same at Rs. 31,932/- only. Be that as it may, the Balance Sheet of the assessee exhibited at page 26 Paper Book shows that the assessee was having own capital of 48.6 crores whereas the investment is 14.88 crores. Therefore, it can be safely concluded that the assessee was having sufficient interest free funds available for making the investments. The ratio laid down by the Hon’ble Bombay High Court in the case of Reliance Utilities & Power Ltd. 313 ITR 340 and in the case of HDFC Bank Ltd. 366 ITR 505, squarely applied on the facts of the case.
Respectfully following the ratio laid down by the Hon’ble High Court (Supra), we are of the opinion that since sufficient interest free funds were available with the assessee, disallowance on the account of interest expenses is uncalled for. However, disallowance in respect of administrative expenses need to be made and in our considered opinion, a disallowance of Rs. 1 lacs should meet the ends of justice. We accordingly direct the AO to restrict the disallowance to Rs. 1 lacs only.
In the result, appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 21/8/2018