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Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI C.N. PRASAD & SHRI ASHWANI TANEJA
आदेश / O R D E R PER C.N.PRASAD (JM) This appeal is filed by the Assessee against the order of the Ld. CIT (Appeals)-8, Mumbai dated 25.03.2014 for the assessment year 2011-12 arising out of assessment order passed u/s 143(3) of the Act.
The first issue in the appeal of the Assessee is in respect of disallowance made u/s 14A of the Act read with rule 8D(2) of the I.T.Rules. The Assessee disallowed Rs.4,33,805/- on its own towards the expenses attributable for earning exempt income. The Assessing Officer while completing the assessment disallowed Rs. 34,07,270/- u/s 14A of the Act comprising of Rs.2,320/- under rule 8D2(i), Rs.27,71,029/- towards interest
(A.Y.2011-12) M/s D.D.Cotton Pvt.Ltd. expenses under Rule 8D2(ii) and Rs.6,33,921/- under Rule 8D2(iii). Since the Assessee itself disallowed Rs.4,33,805/-, the Assessing Officer restricted the disallowance to Rs.29,73,465/-. On appeal, the Ld. CIT (Appeals) confirmed the said disallowance.
Before us, the Ld. Counsel for the Assessee submits that as far as interest disallowance under rule 8D2(ii) is concerned, the Assessee is having enough own funds and the investments are less than its own funds and therefore since capital exceeds investments, no disallowance is required under Rule 8D2(ii). For this proposition he placed reliance on the decision of the Hon’ble Bombay High Court in the case of CIT Vs. HDFC Bank Ltd. [366 ITR 505] and HDFC Bank Ltd. Vs. CIT [383 ITR 529]. The Ld. Counsel submits that excluding investments in mutual funds of Rs.7crore, not capable to earn exempt income and government securities of Rs.0.32 lakhs, the balance investments are of Rs.1064 lakhs as against own funds of Rs.1503 lakhs. The Ld. Counsel further submits that the Assessee has not earned any dividend income on the investments made in mutual funds. Since these investments made are under growth plan no dividend is payable and the income from such investments were taxed under short term capital gain in the assessment year 2012-13.
In respect of disallowance under rule 8D2(iii), the Ld. Counsel submits that only investments on which exempt income earned should be considered for arriving at average investments under this rule and for this proposition he placed reliance on the decision of the Hon’ble Delhi High Court in the case of ACB India Ltd. Vs. ACIT [374 ITR 108] and Cheminvest Ltd. Vs. CIT [378 ITR 33]. For the proposition that mutual funds not yielding dividend income
(A.Y.2011-12) M/s D.D.Cotton Pvt.Ltd. shall not be covered u/s 14A, he placed reliance on the decision of the Coordinate Bench in the case of Manugraph India Ltd. Vs. DCIT in and the Chennai Bench in the case of Sundaram Assets Management Co. Ltd. Vs. DCIT [145 TTD 17].
The Ld. DR vehemently supported the orders of the authorities below.
We have heard both the sides, perused the orders of the authorities below and the case laws relied on. On hearing both the sides, we are of the considered view that the issue of disallowance u/s 14A has to be examined afresh by the Assessing Officer w.r.t. the investments made by the Assessee in mutual funds and to find out the investments whether dividend yielding investments and non dividend yielding investments and examine various other contentions raised by the Assessee before us as these contentions were not examined by the lower authorities. Thus, we restore this issue to the file of the Assessing Officer for adjudication afresh in the light of the submissions made by the Assessee before us as well as the case laws relied on by him.
The next issue in the appeal of the Assessee is that the Ld. CIT (Appeals) erred in upholding disallowance of Rs.66,56,330/- being loss incurred in derivative transactions. At the time of hearing, the Ld. Counsel for the Assessee submits that this ground is not pressed and considering the submission of the Ld. Counsel for the Assessee, we dismiss this ground as not pressed.
(A.Y.2011-12) M/s D.D.Cotton Pvt.Ltd.
The last issue in the appeal of the Assessee is in respect of the disallowance made u/s 14A while computing the book profits u/s 115JB of the Act. As we have restored the issue of disallowance u/s 14A to the Assessing Officer for fresh adjudication, we are of the view that this ground should go back to the Assessing Officer for fresh examination. Thus this ground is also restored to the file of the Assessing Officer.
In the result, appeal of the Assessee is partly allowed for statistical purpose.
Order pronounced in the open court on the 4th day of May 2017.