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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
AadoSa / O R D E R महावीर स िंह, न्याययक दस्य/ PER MAHAVIR SINGH, JM:
This appeal filed by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-21, Mumbai [in short CIT(A)], Appeal No. CIT(A)-21/DCIT-13(3)(1)/IT-62/2016-17 vide order dated 30.10.2017. The Assessment was framed by the Dy. Commissioner of ITAs No. 826/Mum/2018 Income Tax, Circle-13(3)(1) Mumbai (in short ‘ACIT/ITO/ AO’) for the A.Y. 2013-14 vide order dated 24.02.2016 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
The only issue in this appeal of assessee is against the order of CIT(A) confirming the action of the AO in disallowing the expenses relatable to exempt income by invoking the provisions of section 14A of the Act read with section 8D of the Rules (hereinafter the ‘Rules’). For this assessee has raised the following three grounds: - “1. The teamed CIT (Appeals) has erred in law, facts & circumstances of the case while confirming the disallowance of Rs. 9,30,749/- u/s sec 14A r.w.r 8D of the income Fax Act, 1961. 2. The learned CIT (Appeals) Officer has erred in law, facts & circumstances of the case while confirming the disallowance of interest amounting to Rs. 9,30,749/- u/s sec 14A r.w.r 8D of the Income Fax Act. 1961 to the total income of the assessee in view of the fact that on Funds (Share Capital Reserves) are in excess of investment in Tax Free Securities.
3. The Learned CIT(A) has erred in law, facts & circumstances of the case white confirming the disallowance of interest amounting to Rs. 9,30,749/- uls sec 14A r.w.r 8D of the Income Act, 1961 to the total income of the assessee ignoring the fact that the same ITAs No. 826/Mum/2018 issue has been allowed in the Assessee's own case in A.Y. 2012-13 and further erred by ignoring the rule of consistency which requires the revenue to consistently follow the stand taken in earlier years."
At the outset, the learned Counsel for the assessee took us through the disallowance of expenses relatable to exempt income computed by the AO in para 5.2 of his order. According to the learned Counsel, the AO disallowed the interest under Rule 8D(2)(ii) at ₹ 7,93,768/- and administrative expenses under Rule 8D(2)(iii) of the rules, being an amount equal to 1 and ½ % of the average value of investment amounting to ₹ 1,36,981/- thereby the total disallowance made under section 14A of the Act read with Rule 8D of the Rules of ₹ 9,30,749/-. The CIT(A) simply confirm the action of the Assessing Officer. Aggrieved, assessee came in appeal before Tribunal.
Before us, the learned Counsel for the assessee stated that the assessee has no issue as regards to the disallowance of administrative expenses at ₹ 1,36,981/- but only requested that the disallowance of interest expenses should be deleted. He stated that neither the AO nor CIT(A) has considered the issue of availability of funds i.e. tax free funds available with the assessee being share capital and reserve and tax free investments made by assessee as under: - Tax free investment 01.04.2012 ₹ 2,75,32,314/- 31.03.2013 ₹ 2,72,59,970/- Average value ₹ 2,73,96,142/- 4 ITAs No. 826/Mum/2018 Share capital & Reserves 31.03.2012 ₹ 3,53,92,973 (₹ 3,28,77,000/- + ₹ 25,15,973/-)
31.03.2013 ₹ 3,63,59,909/- (₹ 2,83,11,000/- + ₹ 80,48,909/-)
Average ₹ 3,58,76,441/-
The learned Counsel for the assessee in view of the above stated that these needs examination at the level of AO and in case these facts are correct, the AO will delete the disallowance in view of the decision of Hon’ble Bombay High Court in the case of CIT vs. HDFC Bank Ltd.
(2014) 366 ITR 505 (Bom). We are in agreement with the arguments of the learned Counsel for the assessee and when these facts were confronted to the learned Sr. Departmental Representative, he fairly agreed that the issue can be remitted back to the file of the AO for verification of facts. In case this share capital and share reserve i.e. assessee’s own fund are more than the tax free investments, the AO will delete the addition. The AO will verify these facts and will decide accordingly. The appeal of assessee is allowed for statistical purposes.
In the result, the appeal of assessee is allowed for statistical purposes.
Order pronounced in the open court on 19-03-2019. (मनोज कुमार अग्रवाल / MANOJ KUMAR AGGARWAL) (महावीर स िंह /MAHAVIR SINGH) (लेखा दस्य / ACCOUNTANT MEMBER) (न्याययक दस्य/ JUDICIAL MEMBER) मुिंबई, ददनािंक/ Mumbai, Dated: 19-03-2019. स दीप सरकार, व.निजी सधिव / Sudip Sarkar, Sr.PS