SHIVALIK VENTURES P. LTD,MUMBAI vs. DCIT (OSD 1) CEN RG 7, MUMBAI

Assessee has raised the following grounds in its appeal: -

Regarding disallowance made u/s. 14A, briefly stated facts are that, the Assessing Officer while completing the assessment disallowed ₹.11,44,161/- under Rule 8D(2)(ii) and ₹.99,37,519/- under Rule 8D(2)(iii) r.w.s. 14A of the Act. On appeal Ld.CIT(A) sustained the disallowance.

Before us, Ld. Counsel for the assessee in so far as the interest disallowance is concerned submitted that the assessee has own funds more than the investments and one to one nexus was also shown to the Ld.CIT(A). Therefore, placing reliance on the decision of the Hon'ble Jurisdictional High Court in the case of CIT v. HDFC [366 ITR 505] submitted that no interest disallowance is required to be made. He also further submitted that net interest income is positive and therefore in view of the decision of the Hon'ble Jurisdictional High Court in the case of CIT v. Jubiliant Enterprises Pvt. Ltd. in ITA.No. 1512 of 2014 dated 28.02.2017 no part of the interest is liable to be disallowed under Rule 8D(2)(ii).

Coming to the disallowance under Rule 8D(2)(iii) the only submission of the Ld. Counsel for the assessee is that only those investments which yielded dividend income should be considered for computing the disallowance. He placed reliance on the decision of the (A.Y: 2010-11) M/s. Shivalik Ventures Pvt. Ltd., Special Bench of the Tribunal in the case of ACIT v. Vireet investment Pvt ltd [165 ITD 27].

Ld. DR vehemently supported the orders of the authorities below.

We have heard the rival submissions, perused the orders of the authorities below. On perusal of the balance sheet, we notice that the assessee earned interest income of ₹.2,01,80,733/- and incurred interest expenditure of ₹.1,02,39,665/- and the net interest income is positive. Thus, following the decision of the Hon'ble Jurisdictional High Court in the case of CIT v. Jubiliant Enterprises Pvt. Ltd. (supra) we direct the Assessing Officer to delete the disallowance made under Rule 8D(2)(ii). In so far as the disallowance made under Rule 8D(2)(iii) is concerned, in view of the decision of the Special Bench of the Tribunal, only those investments which yielded exempt income should be considered for the purpose of disallowances. Following the Special Bench decision, we direct the Assessing Officer to recompute the disallowance accordingly. The Ground raised by the assessee is partly allowed.

Coming to Ground No.2 i.e. addition on account of income as per 26AS not accounted for in the Books of Accounts, Ld. Counsel for the assessee submitted that the assessee has not received any income from M/s. Vivek Enterprises amounting to ₹.48,52,603/-, therefore, there is no (A.Y: 2010-11) M/s. Shivalik Ventures Pvt. Ltd., question of treating the said amount as income of the assessee. Learned Counsel for the assessee submitted that this issue may be sent back to the file of the Assessing Officer for verification. Ld. DR has no serious objection in restoring the matter back to the file of the Assessing Officer.

Considering the submissions of both the parties, we are of the view that this matter should go back for re-examination to the file of the Assessing Officer. Thus, we restore this issue to the file of the Assessing Officer for denovo adjudication. Assessee is at liberty to file sufficient evidences in support of their contentions. Assessing Officer shall provide all the necessary details to the assessee to reconcile the mis-match. Needless to say that the Assessing Officer shall provide adequate opportunity of being heard to the assessee. This ground is allowed for statistical purposes.

In the result, appeal of the assessee is partly allowed for statistical purposes.