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Income Tax Appellate Tribunal, “E”, BENCH MUMBAI
Before: SHRI R.C.SHARMA, AM & SHRI PAWAN SINGH, JM
आदेश / O R D E R PER R.C.SHARMA (A.M):
This is an appeal filed by the assessee against the order of CIT(A)- 20, Mumbai dated 17/10/2013 for A.Y.2010-11 in the matter of order passed u/s.143(3) of the IT Act,1961.
The following grounds have been taken by the assessee:- (I) Disallowance u/s. 14A r.w.r 8D of Rs. 21,98,149/- (I) On the facts & circumstances & in law the learned CIT(A) - 20, Mumbai [referred as "CIT(A)"] erred in confirming disallowance of Rs. 21,98,149/-, comprising interest Rs.21,04,914/- plus expenses Rs. 93,235/-, under the provisions of section 14A rwr 8D of the Act. (2) On the facts and circumstances the learned CIT(A) failed to appreciate that that the investment was made out of own funds and at M/s. Stationery Point India Ltd., the same time no expenditure was attributable towards the alleged investments, therefore, it is prayed that alleged addition u/s. 14A may be deleted. (II) Disallowance u/s, 40(a)(ia) of Rs. 8,67,164/= out of the interest expenses - (1) On the facts and circumstances and in law, the learned CIT(A) erred in confirming disallowance of interest of Rs. 8,67,164/- [out of the total amount of Rs. 4,76,15,197/-] u7s. 40(a)(ia) alleging that no IDS was deducted under the provisions of section 194A of the Act. (2) On the facts and circumstances the learned CIT(A) erred in not considering the bonafide explanation that Your Appellant was of the bonafide belief that the provisions section 40(a)(ia) apply to the amount payable on account of interest, commission outstanding as on last date and it did not apply to the actual payments made during the relevant assessment year. (III) Your Appellant craves leave to add, amend, alter and7or delete any of the above grounds of appeal
3. Rival contentions have been heard and record perused.
4. Facts in brief are that assessee is engaged in manufacturing and trading of flexible packaging and stationery items. During the course of assessment, AO disallowed Rs.21,98,149/- u/s.14A r.w.Rule 8D. With regard to the disallowance of interest, learned AR invited our attention to the capital and reserves available with the assessee which was much more than the investment, accordingly, it was pleaded that no disallowance of interest should be made in view of the decision of jurisdictional High Court in case of Reliance Utilities and Power Ltd., 313 ITR 240.
5. On the other hand, learned DR relied on the order of the lower authorities.
6. We have considered rival contentions and carefully gone through the orders of the authorities below and found that as per audited balance M/s. Stationery Point India Ltd., sheet placed on record, assessee was having capital reserves and surplus of Rs.25.25 Crores as against which assessee was having investment of Rs.2.47 Crores. Furthermore, the increase in share capital and reserves during the year under consideration is much more than the increase in investment. Accordingly, following the decision of Bombay High Court in case of Reliance Utilities and Power Ltd., wherein it was held that if the assessee had sufficient interest free funds, then presumption can be made that investment in shares / securities were made out of such interest free funds. Accordingly, we do not find any justification for the disallowance in interest so made u/s.14A. So far as disallowance under Rule 8D2(iii) is concerned, we confirm the action of the lower authorities with regard to expenditure of Rs.93,235/-.
7. It was also contention of learned AR that there is no dividend income during the year, therefore, in view of the decision of Delhi High Court in the case of Joint Investment Pvt. Ltd., dated 25/02/2015, no disallowance is warranted. We direct the AO to verify the factual position as to the dividend income having been actually received by the assessee during the year. If the AO found that no dividend income was received, no disallowance is warranted u/s.14A. We direct accordingly.
7. Assessee is also aggrieved for disallowance of interest expenses of Rs.8,67,164/- u/s.40(a)(ia). The disallowance was made by the AO on the plea that no TDS has been deducted u/s.194A.
We have considered rival contentions and found that interest was paid on the car loan taken by the assessee. It was contention of learned