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Income Tax Appellate Tribunal, “E” Bench, Mumbai
Before: Shri B.R. Baskaran (AM)& Shri Pawan Singh (JM)
O R D E R Per B.R. Baskaran (AM) :-
The assessee has filed this appeal challenging the order dated 6.5.2013 passed by the learned CIT(A)-18, Mumbai and it relates to A.Y. 2010-11.
At the time of hearing, learned AR did not press ground No. 4 and hence the same is dismissed as not pressed. Remaining grounds relate to the disallowance made by the Assessing Officer u/s. 14A of the Act.
We have heard the parties and perused the record. During the year under consideration the assessee received dividend income of ` 1,93,800/- and he did not make any disallowance u/s. 14A of the Act. The Assessing Officer computed disallowance by applying rule 8D of the I.T. Rules and made disallowance of ` 5,54,017/- u/s. 14A of the Act. The learned CIT(A) also confirmed the same and hence the assessee has filed this appeal before us.
Learned counsel appearing for the assessee submitted that investment held by the assessee includes “Overseas investments, income from which is 2 M/s. Shantivijay Jewels Ltd.
taxable. Accordingly he submitted that the Assessing Officer was not right in law in including Overseas investments also for working out the disallowance u/s. 14A of the Act. Learned AR further submitted that own funds held by the assessee is in far excess of the amount of Investments and hence disallowance of interest is not required to be made under rule 8D(2)(ii) of the I.T. Rules in view of the decision rendered by Hon'ble Jurisdictional Bombay High Court in the case of HDFC Bank Ltd. (366 ITR 505).
On the contrary, learned Departmental Representative supported the order passed by the learned CIT(A).
Having heard the rival contentions, we find merit in the submissions made by learned AR. Since dividend earned from overseas investments is taxable in India, the same should not have been considered by the Assessing Officer for working out the average value of investment.
We noticed from the Balance sheet filed by the assessee that the assessee is holding interest free funds of about ` 24 crores, while amount of Investments held by the assessee is only ` 2.97 cores. Hence, decision rendered by Hon'ble Jurisdictional High Court in the case of HDFC Bank Ltd.(supra), would apply to the facts of the present case and accordingly there is no requirement to make disallowance out of interest expenditure under rule 8D(2)(ii) of the I.T. Rules.
In view of the above, we set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of the AO with the direction to rework the disallowance u/s 14A r.w.r 8D of the IT rules in accordance with the discussions made supra.
3 M/s. Shantivijay Jewels Ltd.
In the result, the appeal filed by the assessee is treated as allowed for statistical purposes.
Order has been pronounced in the Court on 18.1.2017.