SBI DFHI LTD,MUMBAI vs. ADDL CIT RG 2(1), MUMBAI

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ITA 6367/MUM/2014Status: DisposedITAT Mumbai10 May 2016AY 2011-123 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal followed its own earlier decisions and the jurisdictional High Court's order in the assessee's own case. It was held that when there is a common pool of funds, there is a presumption that investments yielding tax-free returns are made from own funds, and disallowance under Section 14A should be deleted.

What were the facts?

The assessee, SBI DFHI Limited, incurred expenditure in relation to earning exempt income. The Assessing Officer disallowed Rs. 14,08,205/- under Section 14A read with Rule 8D. The assessee appealed this disallowance.

What were the issues?

Whether disallowance under Section 14A is justified when investments are made from a common pool of funds and the assessee has sufficient own funds. Whether the principle of consistency should be applied based on previous favorable orders.

Which sections of the Income-tax Act were involved?

Section 14A

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Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI

Before: SHRI SANJAY ARORA & SHRI PAWAN SINGH

For Appellant: Shri Bhavin Shah (AR)
For Respondent: Shri Abhishek Meshram (DR)
Hearing: 09.05.2015

Assessee by : Shri Bhavin Shah (AR) Revenue by : Shri Abhishek Meshram (DR) Date of hearing : 09.05.2015 Date of Order : 10.05.2016

O R D E R

PER PAWAN SINGH, JM:

1.

The present appeal is filed by the assessee against the order of CIT(A)-4,Mumbai dated 04.08.2014 in respect of Assessment Year (AY) 2011-12. The assessee has raised only one ground of appeal

which is as under:

1. The Ld. CIT(A) erred in confirming the action of the Assessing Officer in making additional disallowance of INR 14,08,205/- (total disallowance of IRN 17,32,205/- after considering the disallowance of INR 3,24,000/- already offered by the appellant in the Return of Income) being expenditure incurred in respect of earning of exempt income.

2.

Brief facts of the case are that the assessee is a company carrying business as primary dealer in government securities and many market operations, filed its return of income for the relevant AY on 27.09.2011 declaring total income at Rs. 88,64,26,692/-. The assessment u/s. 143(3) was completed on 13.02.2013 determining the total income of assessee at Rs. 88,80,58,770/-. In the assessment order, the AO disallowed a sum of Rs. 14,08,205/- u/s. 14A r.w.Rule 8D of I.T. Rules.

3.

Aggrieved by the order of AO, the assessee preferred an appeal before the CIT(A), but remained unsuccessful, against which the present appeal is filed before us.

4.

We have heard the Authorised Representative (AR) of the assessee and Departmental Representative (DR) for revenue and perused the material available on record.

5.

AR of the assessee has argued that that the issue raised in the present appeal is covered by assessee’s own case for AY 2010-2011 in passed by ITAT, Mumbai and further vide the order of Hon’ble jurisdictional High Court in assessee’s own case in respect of AY 2003-04 dated 08.04.2015 in ITA No. 1472/2013 titled as CIT vs. SBI DFHI Ltd. DR for revenue supported the finding of authorities below.

6. We have noticed that similar/identical issue came up for consideration before this Tribunal in assessee’s own case in AY 2010-11 vide ITA No. 975/Mum/2014 and the Co-ordinate Bench of this Tribunal passed the following order: “4. Before us, the ld. Counsel for the assessee has contended that the ld. CIT(A) has erred in not directing the A.O. to restrict the disallowance, as per section 14A of the Income Tax Act, 1961, to Rs. 2,59,000/-, which was also made by the assessee in the return of income; that the ld. CIT(A) erred in confirming the action of the A.O. in allocating the interest to tax free investment; and that while doing so, the ld. CIT(A) has failed to appreciate that the investments were made by the assessee out of interest free own funds.

5. On the other hand, the Ld. D.R. has placed strong reliance in the impugned order. It has been contended that the ld.CIT(A) has correctly followed the first appellate order in the assessee's own case for A.Y. 2009- 10, which has been accepted by the assessee itself.

6.

We have heard the parties and have perused the material on record. In “CIT vs. Reliance Utilities & Power Ltd.”, (2009) 313 ITR 340 (Bom), it has been held that when there is a common pool of funds, there is a presumption that the investment yielding tax free return is made by the assessee out of its own funds. 'Reliance Utilities and Power Ltd.' (supra) was followed by the Tribunal in the assessee's own case for A.Y. 2003-04, in ITA No. 8645/Mum/2010 (assessee's paper book, page Nos. 31-34). The Tribunal dismissed the appeal filed by the Revenue against the action of the ld. CIT(A) in deleting the disallowance made by the A.O. on account of interest u/s 14A of the Act. For assessment years 2004-05 and 2005-06 (assessee's paper book page Nos. 39-40), the Tribunal followed its said decision for A.Y. 2003-04 7. The facts in the year under consideration are similar to those in assessment years 2003-04 to 2005-06. This year, the assessee's own funds, as evident from the assessee's written submissions filed before the ld, CIT(A)

(assessee's paper book pages 46 to 47) are at Rs. 1,11,269.49, lacs (share capital and reserve and surplus) as of 31-3-2010 as against those of Rs. 1,08,562,52 lacs, as of 31-3-2009, Therefore, in keeping with the decision in the case of 'Reliance Utilities and Power Ltd." (supra) and following the decisions in the assessee's own case for assessment years 2003-04, 204-05 and 2005-06, the disallowance made for the year under consideration and confirmed by the ld. CIT(A) on account of interest u/s 14A of the Act is deleted. Accordingly, grounds 1 & 2 are accepted.”

7.

Further we have noticed that the revenue has filed appeal against the order of ITAT dated 31.03.2013 (in respect of AY 2003-04 as submitted by the AR for assessee) vide titled as CIT vs. SBI DHFL Ltd. and the same was dismissed by the Hon’ble jurisdictional High Court vide order dated 08.04.2015, holding that there was no substantial question of law raised which require determination by High Court.

8.

We have seen that the ground raised

in the present appeal is squarely covered in favour of assessee in assessee’s own case as stated above. Hence, keeping in view the principle of consistency, the order of Co-ordinate Bench and the observations of Hon’ble jurisdictional High Court, ground raised in the present appeal is allowed.

9. In the result, the appeal filed by the assessee is allowed.

Order pronounced in the open court on this 10th May, 2016.

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