NAV BHARAT ROLLER FLOUR MILLS (P) LTD., ,SILIGURI vs. ITO, WARD - 1(3), , JALPAIGURI

This assesse’s appeal is directed against the CIT(A), Jalpaiguri’s order, dated 29- 08-2018 passed in case no. 50/CIT(A)/JAL/2016-17 involving proceedings u/s 143(3) of the I.T Act, 1961 ( in short ‘Act’).

The assessee’s sole substantive ground challenges correctness of both the lower authorities’ action invoking section 14A/r.w rule 8D(2)(ii) and (iii) proportionate interest and administrative expenditure disallowance(s) amounting to Rs.9,32,733/- and Rs. 59,127/- respectively totaling to Rs. 9,91,860/-. It emerges during the course of hearing that the assessee’s interest free funds amounts to Rs.3.48 crores as against its investments of Rs. 1.18 crores in yielding exempt income. I therefore reject the Revenue’s arguments in view of hon’ble Bombay high court’s decision in CIT V/s Reliance Utility Power Ltd 313 ITR 314 (Bom) that the necessary presumption in such a case is of utilization of interest free funds only. I therefore delete former disallowance component of Rs. 9,32,733/-.

Coming to later administrative expenditure disallowance component of Rs. 59,127/- , I find that the Assessing Officer has rightly calculated the same at 0.5% of average value of investment prescribed in the statutory formula. I further find that there is no indication in lower authorities’ finding as to whether they have considered only the exempt income yielding investments or not as per hon’ble jurisdictional high court’s decision in PCIT V/s REI Agro Ltd in ITA 220 of 2013. I therefore direct the Assessing Officer to recompute the impugned disallowance qua exempt income yielding investments only. Necessary computation to follow. .

This assessee’s appeal is partly allowed in above terms. Order pronounced in the Court on 20-03-2019