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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI ANIL CHATURVEDI, AM & SHRI VIKAS AWASTHY, JM
आदेश / ORDER
PER VIKAS AWASTHY, JM
These four appeals by the assessee for the assessment years 2009-10 to 2012-13 are directed against the order of Commissioner of Income Tax (Appeals)-12, Pune dated 10.09.2015 common for the aforementioned assessment years.
2 ITA Nos.1638 to 1641/PUN/2015 A.Ys.2009-10 to 2012-13
Since identical issue has been raised in all the four appeals, these
appeals are taken up together for adjudication and are being disposed of
vide this common order.
The assessee in ITA No.1638/PUN/2015 has raised following grounds:
“1.The learned Assessing Officer has erred in applying provisions of rule 8D r.w.s 14A without passing any speaking order as to non-satisfaction about working of disallowance u/s.14A and without establishing any nexus between borrowed funds and investments. 2. The learned Assessing Officer has erred in making disallowance by applying provisions of rule 8D r.w.s 14A ignoring basis/facts established and demonstrated and methodology adopted by the predecessor for A. Y. 2005-06 which facts continued during the year under consideration also. The disallowance u/s 14A be restored as per basis established in order passed u/s 143(3) of the Income Tax Act, 1961 for A.Y. 2005-06. 3. The learned Assessing Officer has erred in making disallowance under provisions of rule 8D r.w.s.14A ignoring the fact that the investments made by the company are of strategic nature and hence no disallowance u/s. 14A r.w.r. 8D is warranted. 4. Your appellant prays leave to add, substitute, amend, modify or withdraw any of the grounds of the appeal if the occasion arises.”
Identical grounds have been raised by the assessee assailing the order
of Commissioner of Income Tax (Appeals) for assessment years 2010-11,
2011-12 and 2012-13.
Shri P.I. Patwa appearing on behalf of the assessee submitted that on
the basis of method adopted for making disallowance in the assessment
year 2005-06, the assessee made suo-moto disallowance u/s.14A of the
Income Tax Act,1961 (hereinafter referred to as ‘the Act’) in the impugned
assessment years. The details of suo-moto disallowances made by assessee
in the impugned assessment years are as under:
3 ITA Nos.1638 to 1641/PUN/2015 A.Ys.2009-10 to 2012-13
Assessment year Amount
2009-10 1,04,49,268/-
2010-11 51,79,590/-
2011-12 1,78,09,980/-
2012-13 2,31,29,018/-
However, in assessment proceedings, the Assessing Officer invoked
the provisions of Rule 8D of the Income Tax Rules, 1962 and enhanced the
disallowances u/s. 14A of the Act as under:
Assessment year Disallowance u/s.14A enhanced by Assessing Officer. (Amount) 2009-10 1,37,98,000/-
2010-11 1,52,19,000/-
2011-12 1,27,07,000/-
2012-13 1,52,11,000/-
The ld. AR submitted that no disallowance under Rule 8D(2)(ii) is
warranted as the assessee has not utilized borrowed funds for making
investment. Own funds of the assessee are much more than the investments
made. The case of the assessee is squarely covered by the decision of
Hon'ble Bombay High Court in the case of CIT Vs. Reliance Utilities and
Power Ltd., reported as 313 ITR 340 and HDFC Bank Limited Vs. DCIT,
reported as 366 ITR 505.
5.1 The ld. AR further submitted that in so far as disallowance under
Rule 8D(2)(iii) is concerned, the Assessing Officer while making disallowance
4 ITA Nos.1638 to 1641/PUN/2015 A.Ys.2009-10 to 2012-13
has not reduced the amount of suo-moto disallowance made by the
assessee. The ld. AR submitted that the disallowance already made by the
assessee should be reduced from the disallowance made under Rule
8D(2)(iii) of the I.T. Rules. In the First Appellate Proceedings, the
Commissioner of Income Tax (Appeals) has confirmed the disallowance
made by Assessing Officer.
On the other hand, Shri J.P. Chandrakar representing the
Department vehemently defended the impugned order and prayed for
dismissing the appeals of the assessee.
We have heard the submissions made by representatives of rival sides
and have perused the orders of Authorities below. The solitary issue raised
in all the four appeals by the assessee is against making disallowance
u/s.14A r.w.r 8D over and above suo-moto disallowance made by the
assessee.
ITA No.1638/PUN/2015 (Assessment Year 2009-10)
The assessee in ground No.1 of the appeal has assailed the manner of
recording satisfaction by Assessing Officer for rejecting suo-moto
disallowance by the assessee. During the course of submissions before us,
the ld. AR of the assessee has failed to point any infirmity in the satisfaction
recorded by the Assessing Officer for invoking provisions of Rule 8D. Hence,
ground No.1 in the appeal by assessee is dismissed.
The assessee has made suo-moto disallowance by adopting the
method as applied in assessment year 2005-06. It is relevant to mention
here that section 14A was amended by the Finance Act, 2006 w.e.f.
5 ITA Nos.1638 to 1641/PUN/2015 A.Ys.2009-10 to 2012-13
01.04.2007. After the amendment disallowance is to be computed in
accordance with Rule 8D of the Income Tax Rules. Thus, the method of
computing disallowance u/s.14A of the Act prior to assessment year 2008-
09 and post amendment have gone under substantial change. Thus, in the
light of the amended provisions of section 14A and introduction of Rule 8D,
the method of computation of disallowance u/s.14A has to be in accordance
with Rule 8D.
As per provision of Rule 8D(2)(ii), the interest paid on borrowed funds
utilized for making investment is to be disallowed. However, where no
interest bearing funds are utilized for making such investment, no
disallowance under Rule 8D(2)(ii) is warranted. The Hon'ble Bombay High
Court in the case of CIT Vs. Reliance Utilities and Power Ltd. (supra.) has
held that where both interest free funds and interest bearing funds are
available and the interest free funds are more than the investment made,
the presumption is that the investment is made out of interest free funds
available with the assessee. The Hon'ble Jurisdictional High Court in the
case of HDFC Bank Ltd. Vs. DCIT (supra.) following the ratio laid down in
the case of CIT Vs. Reliance Utilities and Power Ltd.(supra.) has held that
investment in tax free securities by the assessee would be presumed to have
been made from own funds in case they are in excess of investment made.
In the present case, we find that Authorities below have failed to
consider the decisions of Hon'ble High Court while making disallowance
under Rule 8D(2)(ii) of IT Rules. The Authorities below have also failed to
ascertain availability of interest free funds with the assessee for making
investment during the impugned assessment years. The fact whether
sufficient interest free funds were available with the assessee during the
6 ITA Nos.1638 to 1641/PUN/2015 A.Ys.2009-10 to 2012-13
assessment years under appeal for making investment needs verification.
Under such circumstances, we deem it appropriate to remit this issue back
to the file of the Assessing Officer to verify the availability of interest free
funds with the assessee for making investment and thereafter, by following
the ratio laid down by the Hon'ble Jurisdictional High Court in the cases of
CIT Vs. Reliance Utilities and Power Ltd.(supra.) and HDFC Bank Limited
Vs. DCIT (supra.), shall compute disallowance under rule 8D(2)(ii), if
required.
In so far as disallowance under Rule 8D(2)(iii) is concerned, the
Assessing Officer is directed to reduce the amount of suo-moto disallowance
made by the assessee and thereafter, determine the final disallowance
under the provisions of section 14A r.w.r 8D. The Assessing Officer while
revisiting this issue shall grant reasonable opportunity of hearing to the
assessee, in accordance with law. The ground No. 2 of the appeal by the
assessee is partly allowed for statistical purposes in the terms
aforesaid.
The ld. AR of the assessee has not pressed ground No. 3, accordingly
the same is dismissed.
In the result, the appeal of the assessee in ITA No.1638/PUN/2015
for assessment year 2009-10 is partly allowed for statistical purposes.
In appeals for assessment years 2010-11 to 2012-13, the assessee
has assailed the findings of Commissioner of Income Tax(Appeals) by raising
grounds identical to the grounds raised in the appeal for assessment year
2009-10. It is an admitted fact that the Assessing Officer has made
7 ITA Nos.1638 to 1641/PUN/2015 A.Ys.2009-10 to 2012-13
disallowance u/s.14A r.w.r. 8D in all the four impugned assessment years in similar manner. Thus, the findings given by us while adjudicating appeal of the assessee for assessment year 2009-10 would mutatis-mutandis apply to assessment years 2010-11 to 2012-13. Accordingly, the appeals of the assessee in ITA Nos.1639 to 1641/PUN/2015 for assessment years 2010-11 to 2012-13 are partly allowed for statistical purpose in similar terms.
In the result, the appeals of the assessee for assessment years 2009- 10 to 2012-13 are partly allowed for statistical purposes.
Order pronounced on Friday, the 14th day of September, 2018.
Sd/- Sd/- (अ�नल चतुव�द� /ANIL CHATURVEDI) (�वकास अव�थी /VIKAS AWASTHY) लेखा सद�य/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER
पुणे / Pune; �दनांक / Dated : 14th September, 2018 SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to :
अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(Appeals)-12, Pune. 4. The Pr. CIT, Central, Pune. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “बी” ब�च, 5. पुणे / DR, ITAT, “B” Bench, Pune. गाड� फ़ाइल / Guard File. 6.
// True Copy // आदेशानुसार / BY ORDER,
�नजी स�चव / Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.