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Income Tax Appellate Tribunal, MUMBAI BENCHES “L”, MUMBAI
Before: Shri Shamim Yahya & Shri Sandeep Gosain
Date of Hearing :25.10.2017 Date of Pronouncement : 08.11.2017 O R D E R
Per Sandeep Gosain, Judicial Member
This appeal is by the assessee against the order of CIT(A) -4, Mumbai, dated 11.03.2016 for assessment year 2011-12.
Today the case was fixed for hearing but nobody appeared on behalf of the assessee inspite of repeated calls. It seems the assessee is not interested in pursuing its appeal. On the other hand, the learned DR in the court is ready with his arguments; therefore, we proceed to dispose of the appeal exparte with the assistance of the learned DR and on the basis of the material available on record.
All the grounds raised by the assessee are inter-related and inter connected thereby challenging the order of the CIT(A) in confirming the action of the Assessing Officer in invoking Rule 8D of the Income tax Rules 1962 for disallowance of a sum of ` 68,87,434/- u/s. 14A of the Income tax Act, 1961.
Before we go into the merits of the grounds raised by the assessee, it is necessary to evaluate the orders passed by the lower authorities. The operative portion of the order of the CIT(A) is contained in para 3.2 of his order and the same is reproduced below:
3.2. I have considered the finding of the AO and written submission of the appellant, carefully. I find that appellant has disallowed expenditure without any scientific basis or without applying rule 8D. Earlier appellant has shown disallowable expenditure of Rs.15,828/- on ad-hoc basis in the original computation of income. However, while submitting revised computation of income, assessee has withdrawn the disallowance and has re-determined at Rs.2,41828/. Such calculation is not at all as per rule 8D and hence same cannot be accepted. It is undisputed fact that some expenditure has been incurred by the appellant for earning dividend of Rs.84,6487- and exempted long term capital loss of Rs.7,33,608/-. Hence expenditure has to be disallowed as per section 14A. Since assessee itself has not been able to explain as to how 10% of operative and administrative expenses are related to earning of exempt income, it is therefore necessary to apply rule 8D. The various arguments advanced by Ld. AR are not applicable to the facts of the case is not tenable because it can be seen from the balance sheet that as on 31-03- 2010 there was an investment of Rs. 1,35,85,57,770/- whereas as on 31- 03-2011 it has gone to Rs. 1,39,74,35,647/-. It can also be seen from the balance sheet that total fund including secured loan is of Rs. 1,51,44,74,879/- whereas for fixed asset minus depreciation and capital work in progress is of Rs. 1,37,27,49,091/- and further more, there is loan advanced of Rs.39,01,83,853/-. Thus it is very visible that own funds has been invested either in fixed assets or in current assets, hence expenditure has to be disallowed as per rule 8D. It can be seen from schedule 6 that almost all the investments are capable of exempt income for example non trading investment is of Rs.8,37,01,010/- which is obviously capable of exempt income. Further, unquoted investment with Dighi Project Co. Ltd, Balaji Port Ltd and Uttam Galva Steel Ltd. are also capable of exempt income. Therefore the calculation of AO under rule 8D cannot be discarted. Appellant has not explained as to how average value of investment is factually incorrect. Only round about explanation has been given in the background of various judicial pronouncement, but appellant has not explained as to how such average of investment of investment worked out by AO is not as per rule 8D. Since there is a huge investment capable of dividend and income, expenditure has be disallowed as per rule 8D. Therefore disallowance made by AO is worth approval. The argument that share application money should not be included for calculation of average value of investment is not tenable because such investment is also capable of such share application money is interest bearing fund and has been advanced for investment in equity share, that is also capable of exempt income. I find convincing reason in the finding of the AO that rule 8D makes no difference whether investment is strategic or non strategic or there is simple advance of share application money. Therefore, in the light of these factual difference disallowance of expenditure worked out by AO at ` 68,87,434/- is sustained hence balance disallowance of expenditure of ` 66,46,306 is confirmed.” 5.3 We have heard the learned DR and have gone through the orders of the lower authorities. In the absence of any new facts or circumstances brought before us to controvert or revert the findings recorded by the CIT(A), we see no reason to interfere with his well reasoned order. It is accordingly upheld.
In the result, the appeal by the assessee is dismissed.
Order pronounced in the open court on this day of 8th November 2017