DCIT CENT. CIR. 4(2), CENT. RANGE - 4, MUMBAI vs. K. RAHEJA CORP PVT. LTD., MUMBAI

Ground No. 1 to 2. 3. Since both the above grounds raised by the revenue are inter connected and inter related and relates to challenging the M/s K. Raheja Corp. Pvt. Ltd. order of Ld. CIT(A) in deleting the disallowance of Rs. 14,00,73,911 u/s 14A r.w.r 8D of the I.T. Act, therefore we thought it fit to dispose of the same thorough this common order.

by the revenue in para no. 5 to 8 of its order. The operative portion of the order of Ld. CIT(A) is contained in para no. 7 to 8 of its order and the same is reproduced below:-

7. I have considered the facts of the case and submissions and contentions of the assessee. It appears that this issue has been examined by the Hon'ble ITAT Mumbai, in the case of the assessee itself for the A.Y.2008-09 wherein vide order dated 04-04-2016, the Hon'ble 'A' Bench of ITAT, Mumbai directed to delete fl addition made u/s 14A by observing as under:-

We find that The assessee had share capital of Rs. 60,48,00,000/- and reserves & surplus stood M/s K. Raheja Corp. Pvt. Ltd. at Rs. 1,74,67,67,552/-, whereas the investment was at Rs. 2,06,66,62,442/-, that out of the said investment the assessee had made investment in properties also that the fresh investment in the shares was not very huge, that it had mode strategic investment, that there was no evidence to prove that borrowed funds were utilised for making investment in shares. In our opinion, the settled position of law stipulate that if the assessee has sufficient own funds then it should be presumed that investment was not made from borrowed funds. Considering the availability of funds we are of The opinion that the AO was not justified in disallowing interest expenditure. Similarity, disallowance as per the provisions of section 14A r.w. rule 8D of the Rules cannot be made in a mechanical manner. Thirdly, the disallowance cannot be more than the expenditure claimed by on assessee. We find that in the case of the assessee The Tribunal and the Hon'ble High Courthad decided the identical issue against the AO while deciding the appeal filed by the group concern and respectfully following the orders mentioned in para no. 4, we decide the effective ground of appeal in favour of the assessee.

M/s K. Raheja Corp. Pvt. Ltd. In doing so the Hon'ble ITAT followed its own order in the case of the assessee for earlier years as also the judgment of Hon'ble Jurisdictional high court in case of appellant company in 1TA/4431- 4050/MUM/2000 and ITAs 4159/MUM/2001 and in appeal no 1260 of 2009.

After having gone through the facts of the present case as well as considering the orders passed by revenue authorities and submissions made by both the parties, we find that as per the facts of the present case, the assessee has shown investment of Rs. 258.40 crores in shares of various companies on 31.03.11 as compared to Rs. 131.20 crores on 31.03.2010. As per the profit and loss account of the assessee, it was found by the AO that the assessee had debited an amount of Rs. 1,38,91,50,775/- as interest paid on its borrowed funds. Since the assessee has invested in shares, the income from which does not part of the taxable income of the assessee, therefore, the AO was of the view that the provisions of section 14A r.w.r 8D of the I.T. Act 1961 were attracted in assessee’s case, therefore additions were made. Ld. CIT (A) while appreciating the orders passed by Hon’ble M/s K. Raheja Corp. Pvt. Ltd. ITAT in assessee’s own case for the AY 2008-09, had deleted the additions by holding that the assessee had interest free funds more than the investment in shares. Therefore, while relying upon the judgment of jurisdictional High Court, it was held by Ld. CIT(A) that in such circumstances, it can be safely be presumed that investment in shares have been made out of the interest free surplus funds and hence deleted the disallowance u/s 14A on the premise that the assessee had sufficient interest free funds available. After evaluating the orders passed by ld. CIT(A), we are in agreement with this proposition that when both borrowed and own funds are available and the own funds and interest free loan exceeds investment, the presumption can very well be made that investments have been made from interest free funds and not from borrowed funds. In this circumstances, while placed reliance on the judgment passed by Hon’ble Bombay High court in the HDFC Bank Vrs CIT 366 ITR 505 (Bom), we upheld this portion of the order passed by Ld. CIT(A). The Ld. AR also pointed out that the strategic investments stand at Rs. 198.35 crore out of total investment of Rs. 258.40 crore.

M/s K. Raheja Corp. Pvt. Ltd. From the facts as well as documents placed on record, we further noticed that the assessee had made huge investment as per profit and loss account and necessarily expenses must have been incurred towards undertaking these transaction / activities. Under these circumstances and keeping in view tribunal decisions in the preceding years in assessee’s own case, thus , in order to maintain consistency and judicial discipline , end of justice will be met in the instant case if further disallowance of expenditure u/s 14A is kept at an additional amount of Rs.5,00,000/- towards administrative/misc. expenses to be added to the income of the assessee . This is in view of the non recording of proper satisfaction by the authorities below as to the incorrectness of the claim of the assessee’s claim and also this disallowance u/s 14A so upheld by us is in consonance with the decision of Hon’ble Supreme Court in the case of Godrej and Boyce Manufacturing Company Ltd. v. DCIT (2017) 394 ITR 449(SC). We order accordingly. Ground No. 3 5. This ground raised by the revenue is general in nature, thus requires no specific adjudication.

M/s K. Raheja Corp. Pvt. Ltd.