DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 6(1)(2), BENGALURU vs. M/S. SUBRAMANYA CONSTRUCTIONS & DEVELOPMENT COMPANY LTD.,, BENGALURU

Per Shri Jason P Boaz, A.M. : This appeal by Revenue is directed against the order of Commissioner of Income Tax (Appeals)-6, Bangalore dt.25.11.2016 for the Assessment Year 2010-11. 2. Briefly stated, the facts relevant for disposal of this appeal are as under :-

3.2 The only issue raised in these grounds (supra) by Revenue in challenging the CIT (Appeals) finding in restricting the disallowance of Rs.3,06,44,453 made by the Assessing Officer under Section 14A r.w. Rule 8D(ii)/(iii), to the value of 0.5% on such investments which have earned exempt income. In the year under consideration, the assessee had earned exempt income of Rs.43,000 as dividend from investment in shares of Indian Overseas Bank Limited. 3.3 The learned Departmental Representative for Revenue was heard in support of the grounds raised (supra). According to the learned Departmental Representative, the learned CIT (Appeals) erred in restricting the disallowance under Section 14A r.w. Rule 8D, by deleting the disallowance component under Rule 8D(2)(ii) of Rs.2,74,71,540 as 4 the assessee had huge investments and in restricting the disallowance under Rule 8D(2)(iii) to 0.5% of the average value of investments which has yielded exempt dividend income. It was contended that the learned CIT (Appeals) had failed to appreciate that once the said section was invoked, the Assessing Officer was duty bound to make disallowance under every clause of Rule 8D and could not limit himself to clause (iii). Strong reliance was placed on the order of the Assessing Officer in the matter. 3.4.1 Per contra, the learned Authorised Representative for the assessee submitted that all the investments reflected in the assessee's balance sheet as on 31.3.2010 (i.e. the year under consideration) are opening balances and the investment therein have been made in the earlier years out of own sources and not out of borrowed funds. In this regard, the ld. AR relied on the decision of a co-ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2009-10 in ITA No.404/Bang/2013 and C.O. No.89/Bang/2013, wherein the Tribunal after considering the facts has upheld the learned CIT (Appeals)’s action of deletion of disallowance under Rule 8D(2)(ii), holding that the assessee had interest free funds available with it which was substantially higher than the investment made. According to the learned Authorised Representative, there is no major change in the investments made by the assessee during this year when compared to the investments made in the period relevant to Assessment Year 2009-10, wherein the Tribunal in its aforesaid order (supra) has upheld the deletion of disallowance under 5 Rule 8D(2)(ii) by the learned CIT (Appeals). Since the facts remain same, it was prayed that the deletion of disallowance under Rule 8D(2)(ii) by the learned CIT (Appeals), be upheld. Reliance was placed on the decision of co-ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2009-10(supra) on this issue. 3.4.2 It was further submitted that the assessee, in the year under consideration, had earned exempt dividend income of Rs.43,200 from investment of Rs.2,30,400 in shares of Indian Overseas Bank. In this regard, it was contended that since the aforesaid exempt income was earned from a particular investment, only such investment should be considered for disallowance under Rule 8D(2)(iii) of the Act and in support of the aforesaid proposition, reliance was placed on the decision of the co-ordinate Bench in the case of M/s. Narayana Hrudayalaya Pvt. Ltd. in ITA No.1281/Bang/2014 dt.7.8.2015. 3.5.1 We have heard the rival contentions and perused and carefully considered the details submitted and material on record, including the judicial pronouncement cited. Admittedly, the assessee had earned exempt dividend income of Rs.43,200 from out of investments made by it in shares of Indian Overseas Bank. In the order of assessment, the Assessing Officer has made a disallowance of Rs.2,74,71,540 under Section 14A r.w. Rule 8D(2)(ii). In this regard, our attention was drawn to para 2 on page 2 of the impugned order of assessment wherein the Assessing Officer has tabulated the investments made by the assessee at Rs.63,44,00,474 and also to para 7 of the order of the co-ordinate

6 bench of this Tribunal in the assessee's own case for Assessment Year 2009-10 (supra) wherein the investments of the assessee as on 31.3.2009 is Rs.63,49,08,874; to show that there was hardly any change in the investments of the assessee in the Assessment Years 2009-10 and 2010- 11. The co-ordinate bench of this Tribunal in the assessee's own case, in similar factual situation at para 8 of its order for Assessment Year 2009- 10 (supra), confirmed the deletion of the disallowance u/R 8D(2)(Ii), holding that undoubtedly interest free funds available with the assessee was substantially higher than the investments made by it in these years. In our considered view, on an appraisal of the material on record, factual position remaining the same and also since there is no change in the investment pattern and availability of interest free funds, the findings rendered by the co-ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2009-10 (supra) would squarely apply to this year also. Therefore, respectfully following the decision of the co- ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2009-10 (supra), we uphold the order of the learned CIT (Appeals) in deleting the disallowance of Rs.2,74,71,540 u/R 8D(2)(ii) made by the Assessing Officer in the impugned order of assessment. Consequently, grounds raised by Revenue in this regard are dismissed.

3.5.2 In respect of the disallowance u/R 8D(2)(iii), the fact is that in the year under consideration the assessee earned interest free dividend of Rs.43,200 from investment in shares of Indian Overseas Bank, we are inclined to concur with the contentions of the assessee and the findings

7 rendered by the learned CIT (Appeals) in the light of the decision of the co-ordinate bench of this Tribunal in the case of M/s. Narayana Hrudayalaya P. Ltd. in ITA No.1281/Bang/2014 dt.7.8.2015 which squarely covers the issue before us. In this view of the matter, we find no requirement to interfere with or deviate the finding rendered by the learned CIT (Appeals) in the matter and consequently dismiss grounds raised by Revenue.