ANNAPURNA SHRIKANT TIBREWALA,MUMBAI vs. ASST CIT CEN CIR 43, MUMBAI

This appeal by the Assessee is arising out of the order of the CIT-(A)-36, Mumbai in appeal No.CIT(A)-36/AP-88/12-13 dated 11-03-2013. Assessment was framed by the ACIT, Central Circle-43, Mumbai for the assessment year 2009-10 vide his order dated 16-12-2011 u/s 143(3) of the Income Tax Act, 1961 (hereinafter „the Act‟).

The only issue in this appeal of the assessee is against the order of the CIT (A), Mumbai in confirming the disallowance of expenditure relatable to exempted income by the AO amounting to Rs.18,23,244/- by invoking the provisions of section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 (hereinafter “the Rules”). 3. Briefly stated facts are that the AO during the course of the assessment proceedings noticed from the statement of account that the assessee has derived dividend income of Rs.5,37,941/-, which was claimed as exempt u/s 10(38) of the Act. According to the AO, no expenses have been attributed against this exempt income and accordingly, he by invoking the provisions of Section 14A of the Act read with Rule 8D of the Rules made disallowance of interest and average of value of investment at Rs.18,23,244/-. Aggrieved, the assessee preferred appeal before the CIT (A), who also confirmed the action of the AO without going into the facts of the case. Aggrieved, now the assessee is in second appeal before the Tribunal.

We have heard the learned Sr. DR and gone through the facts and circumstances of the case. Before us, the learned Counsel for the assessee first of all taken us through the assessee‟s accounts filed before the AO during the course of assessment proceedings. He has taken us through the balance as on 31-03- 2009 wherein secured loan from Standard Chartered Bank Ltd. was taken of Rs.1,41,67,128/- and on this, interest paid was Rs.17,24,096/-. The learned Counsel for the assessee stated that this secured loan was advanced to Roha Dye Chem Pvt. Ltd. amounting to Rs.1.50 crores on 26-05-2008 immediately after credit of the same amount of Rs.1,44,27,500/- on 26-05-2008 in Bank of India, Sion Branch, account No.0041101100043190. In view of this, the learned Counsel for the assessee stated that the investment in shares to the tune of Rs.9,18,68,280/- and the assessee‟s own capital is about Rs.7,14,65,709/-. In view of this, the learned Counsel for the assessee clearly stated that this secured loan from Standard Chartered Bank Ltd. was given to Roha Dye Chem Pvt. Ltd. from where the assessee has earned interest income at Rs.20,76,618/- and paid tax on the same. The learned Counsel for the assessee fully explained the nexus between the loan taken from the Standard Chartered Bank Ltd. and the amount advanced to Roha Dye Chem Pvt. Ltd. When these facts were confronted, the learned Sr. DR could not find any fault. In view of the clear facts of the case, we are of the view that there is no expenditure claimed by the assessee quo this exempted income. In terms of the above, we reverse the orders of the authorities below and allow the claim of the assessee.

In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 20-10-2016.