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Income Tax Appellate Tribunal, MUMBAI BENCH “H”, MUMBAI
Before: SHRI C.N. PRASAD, HONBLE & SHRI RAJESH KUMAR, HONBLE
PER C.N. PRASAD (JM) 1. This appeal is filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)–9, Mumbai dated 04.12.15 for the Assessment Year 2012-13.
The first ground of appeal is regarding confirming the disallowance of interest of ₹.11,08,354/- under Rule 8D2(ii) r.w.s. 14A of the Act.
2 ITA.No. 1515/MUM/2016 (A.Y:2012-13) Shri Prashant Jayantilal Patel 3. At the outset Learned Counsel for the assessee submitted before us that during the Assessment Year under consideration assessee made investments only to the extent of ₹.30.16 Crores whereas it had sufficient funds i.e. Capital to the extent of ₹.91.41 Crores. Therefore Ld. Counsel for the assessee submitted that, in view of the decision of the Hon'ble Jurisdictional High Court in the case of CIT v. HDFC Bank Ltd [366 ITR 505] when the assessee is having sufficient interest free funds and also borrowed funds, the presumption is that the investments were made out of interest free funds and therefore no disallowance is required to be made. Ld. Counsel for the assessee further submits that identical issue was decided in the assessee’s own case for the Assessment Year 2011-12 by the Coordinate Bench in ITA.No. 2113/Mum/2015 dated 20.12.2016.
Ld. DR vehemently supported the orders of the authorities below.
We have heard the rival submissions, perused the orders of the authorities below. It has been held by the Hon'ble Jurisdictional High Court that, when there were sufficient own funds there was a presumption that investment in tax free securities was made out of own funds and therefore no part of interest is liable to be disallowed. On a perusal of the balance sheet of the assessee the capital account as on 31.03.2012 stood
3 ITA.No. 1515/MUM/2016 (A.Y:2012-13) Shri Prashant Jayantilal Patel at ₹.91,41,07,468/- and the investments at ₹.30,16,60,779/-. Therefore, it is evident that the assessee is having sufficient own funds for making investments in tax free securities. In the circumstances, there shall not be any disallowance under Rule 8D2(ii) of the Act. Hence, we direct the Assessing Officer to delete the interest disallowed under Rule 8D2(ii).
Coming to Ground No. 2 of ground of appeal i.e. in confirming the disallowance under Rule 8D 2(iii) r.w.s. 14A of the Act.
7. The only submission of the assessee is that, only the dividend yielding investments should be considered for computing the disallowance under Rule 8D2(iii) in view of the decision of the Special Bench in the case of ACIT v. Vireet Investments Private Limited [165 ITD 27].
Ld. DR vehemently supported the orders of the Assessing Officer.
On hearing both the sides and pursuant to the orders of the Authorities below, we direct the Assessing Officer to recompute the disallowance under 14A r.w. Rule 8D2(iii) only considering the dividend yielding investment in tax free securities following the decision of the Special Bench in the case of ACIT v. Vireet Investments Private Limited (supra). This ground is partly allowed.
4 ITA.No. 1515/MUM/2016 (A.Y:2012-13) Shri Prashant Jayantilal Patel 10. In the result, appeal of the assessee is partly allowed.
Order pronounced in the open court on the 23rd April, 2018.