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Income Tax Appellate Tribunal, MUMBAI BENCH “D”, MUMBAI
Before: SHRI C.N. PRASAD, HONBLE & SHRI N.K. PRADHAN, HONBLE
O R D E R PER C.N. PRASAD 1. This appeal is filed by the assessee against the order of the Ld.CIT(A)–10, Mumbai dated 17.12.2015 for the Assessment Year 2011-12.
Assessee in its appeal raised three grounds of appeal and mainly the first ground of appeal is in respect of confirming the disallowance u/s. 14A r.w. Rule 8D of the Act.
(A.Y: 2011-12) M/s. Revashankar Gems Limited 3. Briefly stated the facts are that, the Assessing Officer while completing the assessment worked out the disallowance u/s. 14A r.w. Rule 8D2(ii) at ₹.9,92,591/- and under Rule 8D2(iii) at ₹.2,12,627/-. The working of the Assessing Officer towards disallowance u/s.14A r.w. Rule 8D was sustained by the Ld.CIT(A) by following his predecessor’s order for the Assessment Year 2008-09.
Ld. Counsel for the assessee before us contends that the total investments made by the assessee during the current Assessment Year are only to the extent of ₹.1039.86 Lakhs and whereas Capital and Reserves of the assessee stood at ₹.2818.77 Lakhs. He further submitted that the Coordinate Bench in assessee’s own case for the Assessment Year 2008-09 to 2010-11 had accepted the contention of the assessee that, if adequate interest free funds are available then no disallowance needed in view of the decision of the Hon'ble Jurisdictional High Court in the cases of CIT v. HDFC Bank Ltd. [366 ITR 505] and CIT v. Reliance Utilities Power Limited [313 ITR 340] and the matter was set-aside. He also further submitted that the Assessing Officer passed order giving effect to the Tribunal order for the Assessment Years 2009-10 and 2010- 11 accepting that the interest free funds are much more than the investments and no disallowance was made towards interest under Rule 8D2(ii). Learned Counsel for the assessee further submits that in respect
(A.Y: 2011-12) M/s. Revashankar Gems Limited of disallowance under Rule 8D(2)(iii) only those investments which yielded dividend income should be considered for the disallowance in view of the Special Bench decision in the case of ACIT v. Vireet Investments Private Limited [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. The contention of the assessee that, the Capital Reserves and interest free funds are much more than the investments, have to be examined by the Assessing Officer. It is true that the Hon'ble Jurisdictional High Court in the cases of CIT v. HDFC Bank Ltd (supra) and CIT v. Reliance Utilities Power Limited (supra) held that, if assessee had adequate interest free funds available with it, no disallowance needs to be made under Rule 8D2(ii). In the circumstances, we remit this issue to the file of the Assessing Officer who shall examine the contentions of the assessee that the interest free funds are much more than the investments. If the submissions of the assessee are found to be correct, no disallowance under Rule 8D2(ii) is required in view of the decisions of the Hon'ble Jurisdictional High Court in the cases of CIT v. HDFC Bank Ltd and CIT v. Reliance Utilities Power Limited (supra). Similarly, the Special Bench in the case of ACIT v. Vireet Investments Private Limited held that only those investments which yielded dividend income should be (A.Y: 2011-12) M/s. Revashankar Gems Limited considered for disallowance under Rule 8D2(iii). Thus, respectfully following the Special Bench decision, we direct the Assessing Officer to recompute the disallowance under Rule 8D2(iii) following the Special Bench. Accordingly, we set-aside this issue to the file of the Assessing Officer with the above observations. This ground of appeal is allowed for statistical purpose.
7. Coming to Ground No.2 i.e. disallowance of interest of ₹.9,70,632/- u/s. 36(1)(iii) of the Act, assessee has been allotted the office premises at Bharat Diamond Bourse, etc several years ago and was making payments of various installments towards the same. In addition, assessee had given advance for booking various other premises for the purpose of its business. It was the contention of the Assessee that, there was no amount which was specifically borrowed to acquire these assets and the assessee had adequate interest free funds at its disposal and it was contended that capital and accumulated reserves of the assessee at the beginning of the year were ₹.2682 lakhs and the amount advanced in question was ₹.405.55 lakhs only. However, the Assessing Officer assuming that the interest borrowing funds must have used for this purpose accordingly disallowed ₹.9,70,632/- out of interest expenses as interest attributable to the said advance. Ld. Counsel for the assessee at this stage submitted that this issue arose in the Assessment Years
(A.Y: 2011-12) M/s. Revashankar Gems Limited 2008-09, 2009-10 and 2010-11 and the Tribunal had set aside the issue to the file of the Assessing Officer for examining the contentions of the assessee and the consequential orders were passed accepting that the assessee has its own funds much more than the investments and no interest was disallowed u/s. 36(1)(iii) and also no proportionate interest expenses were disallowed towards and the advances to partnership firm.
Ld.DR has no objection in following the order of the Coordinate Bench in assessee’s own case for the earlier year Assessment Years.
On hearing both the parties, we find that the issue in appeal has been set-aside by the Coordinate Bench in assessee’s own case for the Assessment Years 2008-09, 2009-10 and 2010-11 and consequential orders were also passed accepting the contentions of the assessee. Respectfully following the said decision of the Coordinate Bench in ITA.No. 1679 and 6423/Mum/2013 dated 16.06.2016, we restore ground No.2 to the file of the Assessing Officer and direct the Assessing Officer to examine the case of the assessee and decide afresh in the light of the directions contained in the orders passed for the Assessment Years 2008- 09, 2009-10 and 2010-11 after providing adequate opportunity of being heard to the assessee along with further liberty to furnish evidence if any by the assessee in support of its claims. Since ground No.3 is also connected to ground No.2, this ground is also restored to Assessing
(A.Y: 2011-12) M/s. Revashankar Gems Limited Officer to examine the contentions of the assessee. Thus, ground No’s 2 and 3 are allowed for statistical purpose.
In the result, appeal of the assessee is partly allowed for statistical purpose.
Order pronounced in the open court on the 05th February, 2018.