DCIT CIR - 3(3), MUMBAI vs. SAURASHTRA FUELS PVT. LTD., MUMBAI

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ITA 1659/MUM/2015Status: DisposedITAT Mumbai18 November 2016AY 2011-123 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s decision, finding that the assessee had sufficient own interest-free funds to cover its investments in tax-free securities. Therefore, no disallowance of interest was warranted as per the ratio laid down by the jurisdictional High Court.

What were the facts?

The Revenue appealed the deletion of proportionate interest disallowance made by the Assessing Officer (AO) under Section 14A read with Rule 8D(2). The AO had disallowed Rs. 1,77,66,839/-, and the CIT(A) deleted Rs. 1,62,69,769/- related to interest disallowance.

What were the issues?

Whether the CIT(A) was justified in deleting proportionate interest disallowance under Section 14A when the assessee had sufficient own interest-free funds to cover investments in tax-free securities.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI

Before: SHRI D. KARUNAKARA RAO & SHRI C.N. PRASAD

For Appellant: Shri Brijmohan P. Agarwal
For Respondent: Shri B.V. Jhaveri
Hearing: 09.11.2016Pronounced: 18.11.2016

सुनवाई की तायीख / Date of Hearing : 09.11.2016 घोषणा की तायीख /Date of Pronouncement : 18.11.2016 आदेश / O R D E R PER D. KARUNAKARA RAO, AM:

This appeal filed by the Revenue on 20.3.2015 is against the order of the CIT (A)-8, Mumbai dated 12.12.2014 for the assessment year 2011-2012. In this appeal, assessee raised the following grounds which read as under:- “1. Whether on the facts and in the circumstances of the case and in law, the Ld CIT (A) was justified in deleting proportionate interest of Rs. 1,62,69,769/- out of total disallowance u/s 14A of Rs. 1,77,66,839/- holding that the assessee has own interest free funds available more than the investment made in tax free securities without appreciating the fact that as per section 14A of the Act, the relation has to be seen between the exempt income and the expenditure incurred in relation to it and not vice versa.

2. Whether on the facts and in the circumstances of the case and in law, the Ld CIT (A) was justified in deleting proportionate interest of Rs. 1,62,69,769/- out of total disallowance u/s 14A of Rs. 1,77,66,839/- relying on the decision of the Hon’ble Bombay High Court in the case of CIT vs. Reliance Utilities and Power Ltd without appreciating the fact that the decision is in the context of disallowance of interest expenditure u/s 36(1)(iii) of the Act and has no direct application for a disallowance u/s 14A.”

2. At the outset, Ld Counsel for the assessee briefly narrated the facts of the case and mentioned that the AO disallowed a sum of Rs. 1,77,66,839/- u/s 14A read with Rule 8D(2) of the IT Rules, 1962 (the Rules). AO quantified the disallowance

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