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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI RAJENDRA, AM & SHRI AMARJIT SINGH, JM
आयकर अपील सं/ (िनधा�रण वष� / Assessment Year: 2011-12) बनाम/ M/s. Safe Clearing & Income Tax Officer 7(2)(2) Forwarding Pvt. Ltd. Mumbai Vs. 105, Ashirwad Building, Ahmadabad Street, Mumbai – 400 009 �थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AABCS6419H (अपीलाथ� /Appellant) (��थ� / Respondent) .. Assessee by: Shri Rakesh Joshi & Ms. Vinita Shah Revenue by: Shri Rajguru M. V. सुनवाई की तारीख / Date of Hearing: 24.03.2017 घोषणा की तारीख /Date of Pronouncement: 29.03.2017 आदेश / O R D E R PER AMARJIT SINGH, JM:
The assessee has filed the present appeal against the order dated 19.02.2015 passed by the Commissioner of Income Tax (Appeals)-14, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2011-12.
The assessee has raised the following grounds:-
ITA No.2193/M/2015 A.Y.2011-12
“1. On the fact and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in disallowing a sum of Rs.11,17,140/- u/s.14A r.w.r. 8D of the Income Tax Rules, 1962 by alleging that the said expenses have been incurred for earning exempt income, without considering the facts and circumstances of the case. 2. The appellant craves leave to add, amend, alter or delete the said ground of appeal.”
3. The brief facts of the case are that the assessee company filed its E- return of income on 24.09.2011 declaring total taxable income to the tune of Rs.Nil after setting off the brought forward losses of earlier years. The return was processed u/s.143(1) of the Income Tax Act, 1961 ( in short “the Act”). The case was selected for scrutiny and notices u/s.143(2) of the Act dated 01.08.2012 and 142(1) of the Act were issued to the assessee which were duly served upon the assessee. The assessee also claimed the interest expenditure and also various other administrative expenses in the Profit & Loss Account. The Assessing Officer applied the provision u/s.14A r.w.Rule 8D of the Act and disallowed the expenditure to the tune of Rs.11,17,140/-. Feeling aggrieved the assessee has filed the appeal before the CIT(A) who confirmed the order, therefore, the assessee has filed the present appeal before us.
ISSUE NO.1:-
Under this issue, the assessee has challenged the disallowance u/s.14A read with Rule 8D of the Act to the tune of Rs.11,17,140/-. It is not in dispute that the assessee has earned the exempt income to the tune of Rs.30,131/-. The learned representative of the assessee has argued that the ITA No.2193/M/2015 A.Y.2011-12 assessee was having the reserve and surplus fund to the tune of Rs.64,40,000/- whereas the investment to the tune of Rs.61,15,864/- which is less, therefore, in the said circumstances the investment is required to be considered on behalf of the assessee’s asset hence no expenditure on account of interest is liable to be assessed in view of the law settled in Hon’ble Bombay High Court in case titled as HDFC Bank Vs. DCIT 366 ITR 505 (Bombay) and in case titled as CIT Vs. Reliance Utilities 313 ITR 340. However, on the other hand the learned representative of the department has placed reliance on the order passed by the CIT(A) in question. The balance sheet as on 31.03.2011 is on the file at page 4 of the paper book which speaks that the assessee was having the reserve and surplus fund to the tune of Rs.64,40,000/- and the investment to the tune of Rs.61,15,864/- which is less than the reserve and surplus fund. In view of the law settled in Hon’ble Bombay High Court in case titled as CIT Vs. Reliance Utilities 313 ITR 340, in which it is specifically held that whereas an assessee has his own fund as well as borrowed funds, a presumption can be made that the advances for non-business purposes have been made out of the own funds and that the borrowed funds have not been used for this purpose. In view of the law settled in HDFC Bank Vs. DCIT 366 ITR 505 (Bombay), it is specifically held that where the assessee have own funds more than the investment then it would assume that the assessee has made the investment from his own fund and he did not utilise the borrowed funds in the investment in the tax free securities. Moreover, it also came into the notice that the assessee did not claim any expenditure. It also came into the notice that the assessee has earned the exempt income to the tune of Rs.30,131/- and the expenditure was assessed to the tune of Rs.11,17,140/-
ITA No.2193/M/2015 A.Y.2011-12 which does not seems justifiable in view of above mentioned law, we are of the view that the assessee has invested his own funds to earn the exempt income, therefore no expenditure is liable to be assessed on account of interest expenditure in view of the provision of section 14 read with Rule 8D of the Act. However, we restrict the expenses assessed by the Assessing Officer in view of the provision u/s.8D(iii) of the Act to the tune of Rs.19,139/- and delete the remaining expenditure assessed by the Assessing Officer. Accordingly, this issue is hereby decided in favour of the assessee against the revenue.