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Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: SHRI DUVVURU R.L. REDDY & SHRI S. JAYARAMAN
आदेश / O R D E R
PER SHRI S. JAYARAMAN, ACCOUNTANT MEMBER:
The Revenue filed this appeal against the order of the Commissioner of Income Tax (Appeals)-6, Chennai, in dated 26.11.2018 for the AY 2015-16.
M/s. Envestor Ventures Ltd., the assessee, is in the business of Investment Promotion including facilitating Private Equity. While making the assessment for the AY 2015-16, the AO found that the assessee had invested in equity shares at Rs.120,36,22,878/- as on 31.03.2015. Since the investment is capable of earning dividend, the AO required to show cause why the disallowance cannot be made u/s.14A. After considering the assessee’s reply etc, the AO held that the assessee made investment of Rs.134,05,71,759/- during this assessment year. Though, the assessee claimed the sources for the investment was out of interest free loan taken from its group concerns M/s.Shamani Management Services Pvt. Ltd, the AO found that the assessee took a loan of Rs.75 Crs. from M/s.Shriram City Union Finance Ltd., at the interest cost of Rs.7,24,71,575/- and re- paid the loan taken from M/s.Shamani Management Services Pvt. Ltd. Therefore, the AO held that since the interest bearing loan was utilized to repay the existing non-interest bearing loan, which was the source for the investment which yielded dividend income, the finance cost incurred by the assessee at Rs.7,24,71,575/- was directly related to exempt income and hence he disallowed it u/r.8D(i). He further disallowed Rs.8,71,557/- u/r.8D(iii) and completed the assessment.
Aggrieved against that order the assessee filed an appeal before the CIT(A). The Ld.CIT(A) relied on the decision of the Hon’ble Supreme Court in the case of PCIT v. State Bank of Patiala reported in [2018] 99 taxmann.com 286 (SC) and held that the amount of disallowance u/s.14A could be restricted to the amount of exempt income only. Since the assessee earned dividend income of Rs.2,58,225/- only during the assessment year from M/s.Tech Solutions Ltd., he restricted the disallowance u/s.14A to Rs.2,58,225/- and thus, partly allowed the appeal.
Aggrieved against that order, the Revenue filed this appeal with the following grounds:
1 The CIT(A) erred in directing the AO to restrict the disallowance to the earning of exempted income.
2 The CIT(A) ought to have appreciated the fact that a proposal in the case of M/s. Chettinadu Logistics Pvt Ltd has been sent to the Pr.DGIT, (L&R), New Delhi for filing of review petition before the Hon'ble Supreme Court vide C.No.450/1/PClT(C)-1/2017-18 dated 20.12.2018 by the DGIT (Inv) Chennai.
3 The CIT(A) ought to have appreciated the fact that the CBDT circular No.5/201 wherein it is clarified that, disallowance u/s.14A r.w.r, 8D has to be made even the taxpayer in a particular year not earned any exempt income.
4 For these and other grounds that may be adduced at the time of hearing, it is prayed that the Order of the learned Commissioner of Income Tax (Appeals) be set aside and that of the Assessing Officer be restored.
The Ld.DR argued on the lines of grounds of appeal. Per contra, the Ld.AR supported the order of the Ld.CIT(A).
6. We heard the rival submissions and gone through the relevant materials. Since the Ld. CIT(A) followed the decision of the Hon’ble Supreme Court in the case of PCIT v. State Bank of Patiala, supra, we do not find any reason to interfere with the order of the Ld.CIT(A) and hence dismiss the revenue’s appeal.
In the result, the appeal filed by the Revenue is dismissed.