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Income Tax Appellate Tribunal, “H” BENCH, MUMBAI
Before: SHRI B.R. BASKARAN & SHRI C.N. PRASAD
सुनवाई क" तार"ख / Date of Hearing :02.06.2016 घोषणा क" तार"ख /Date of Pronouncement :13.07.2016 आदेश / O R D E R
PER C.N. PRASAD, JM:
This appeal is filed by the Revenue against the order of the Ld. CIT(A)-21, Mumbai dated 1.8.2014 pertaining to assessment year 2010-11.
The only issue in Revenue’s appeal is that the Ld. CIT(A) erred in directing the Assessing Officer to restrict the disallowance u/s. 14A r.w. Rule 8D to 0.5% of the average investment. 3. The Assessing Officer while completing the assessment disallowed interest of Rs. 53,75,374/- under Rule 8D(2)(ii) and Rs. 2 46,30,726/- being 0.5% of average value of investment was disallowed under Rule 8D(2)(iii) of the Act towards expenses attributable for earning exempt income u/s. 14A of the Act.
On appeal, the Ld. CIT(A) deleted the disallowance in so far as the interest disallowance of Rs. 53,75,374/- is concerned but sustained the disallowance in respect of 0.5% of the average investments towards administrative expenses.
The Revenue is in appeal against the deletion of disallowance of interest.
The Ld. Departmental Representative supporting the order of the Assessing Officer vehemently submits that the Ld. CIT(A) is not justified in deleting the disallowance of Rs. 53,75,374/- in respect of interest under Rule 8D(2)(ii).
The Ld. Counsel for the assessee vehemently supports the orders of the Ld. CIT(A) and submits that assessee has sufficient surplus funds to make the investments and therefore no part of the borrowed loans were utilized for investments hence expenses towards interest cannot be disallowed under Rule 8D(2)(ii). He further places reliance on the Jurisdictional High Court in the case of CIT Vs HDFC Bank in I.T Appeal No. 30 of 2012 & CIT Vs Reliance Utilities & Power Ltd., (313 ITR 340) (Bom) in support of his contentions.
3 7. We have heard the rival contentions and perused the orders of the authorities below. It is the findings of the Ld. CIT(A) that assessee’s share capital is Rs. 5.50 crores, reserves and surplus of the assessee stood at Rs. 486.46 crores and whereas the investments for earning exempt income was Rs. 14.98 crores, therefore since the reserves and surplus funds are far more than the investments, the Ld. CIT(A) deleted the disallowance observing as under:
I have considered the facts and circumstances of the case and verified the facts of the case. The appellant’s share capital is Rs. 5.50 crores, reserves & surplus of Rs. 486.46 crores and appellant’s “ investments for earning the exempt income is Rs. 14.98 cvrores. Here appellant’s share capital and reserves is much more than the investment. In view of Bombay High Court decision in the case of CIT Vs Reliance Utilities & Power Ltd 313 ITR 340 (Bom) wherein it is held that “if the share capital, reserves & surplus is more than the investment which is to be considered that appellant had invested from the own funds, hence, no interest expenditure can be disallowed . Same view is held in CIT Vs HDFC Bank in of 2012 (Bombay High Court), CIT Vs UTI Bank Ltd, ITA No. 180/2013 (Guj), CIT Vs Gujarat State Fertilizers and Chemical Ltd 358 ITR 323 (Guj). Following the above decisions, disallowance for interest expenditure of Rs. 53,75,374/- is deleted. However, the Assessing Officer is directed to compute 0.5% of the average investments for the expenditure under administrative expenses. This ground of appeal is partly allowed”.
8. On reading of the Ld. CIT(A), we do not find any valid reason to disturb the findings especially when there is no evidence placed on record to rebut the findings of the Ld. CIT(A). Therefore, we sustain the orders of the Ld. CIT(A).
4 9. In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open court on 13th July, 2016. (B.R. BASKARAN) (C.N. PRASAD ) लेखा सद"य / ACCOUNTANT MEMBER "या"यक सद"य/JUDICIAL MEMBER मुंबई Mumbai; "दनांक Dated 13th July, 2016 व."न.स./ Rj , Sr. PS