REVASHANKAR GEMS LTD,MUMBAI vs. DCIT RG 5(3), MUMBAI

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.

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

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.

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

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