D.C.I.T, CIRCLE 3(1), MUMBAI vs. BANK OF RAJASTHAN LTD.(NOW MEGED WITH ICICI BANK LTD W.E.F 12.8.2010), MUMBAI

आदेश / O R D E R

Per Joginder Singh (Judicial Member) The Revenue is aggrieved by the impugned order dated 16/09/2013 of the First Appellate Authority, Mumbai. The only ground raised in the present appeal pertains to restricting the addition made u/s 14A of the Act read with Rule 8D(2)(ii) of the rules, at1/2% average value of investment at Rs.18,12,188/- against Rs.2,19,14,325/- made by the Assessing Officer relying upon the decision of the Tribunal in the case of HDFC Bank Ltd. (ITA No.4529/Mum/2005) dated 30/01/2012, wherein, it was held that if the assessee’s own funds and non-interest bearing funds are more than the investment in the tax free securities, there can be no basis for deeming that assessee used borrowed funds for making investment in tax free securities without appreciating the fact as per the provisions of Rule-8D of the Rules, if the Assessing Officer is not satisfied with the correctness of the claim of the assessee, in respect of expenditure claimed, he has no option but to

2.1. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the erstwhile, the Bank of Rajasthan, was regularly assessed to tax and engaged in business of banking activities, which merged with ICICI bank Ltd. w.e.f.

13/08/2010, the assessee bank, as per RBI norms, kept certain securities in order to maintain in SLR (Statutory Liquidity Ratio) and CCR (Cash Reserve Ratio) in order to protect the bank from an unexpected huge amount of withdrawals by the depositors. During the Financial Year 2008-09, the assessee earned income from dividends, exempt u/s 10(34) of the Act amounting to Rs.2,79,59,278/-. The M/s Bank of Rajasthan (Now merged with ICII Bank Ltd. assessee in its return offered an amount of Rs.18,12,188/- being 1/2 % of the average value of the investment, as per provisions of rule 8D(2)(iii) of the Act. The Assessing Officer considering the apportioned interest expenses of Rs.2,19,14,325/-, to the exempt dividend income made disallowance of this amount. The aggrieved assessee carried the matter in appeal before the ld. CIT(A), wherein, the disallowance of impugned amount was deleted. The Revenue is in appeal before this Tribunal.

2.1. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, we find that for Assessment year 2002-03 to 2007-08, identically, the claim of the assessee was allowed. In the impugned Assessment year also the assessment was made out of share capitals, reserves and own interest free funds available with the assessee. The assessee was having cost free funds of Rs.145.59 crores as on 31/03/2009 and the investment ins shares/securities

M/s Bank of Rajasthan (Now merged with ICII Bank Ltd. was Rs.77.27 crores, meaning thereby, the investment was made out of own funds only and not from the borrowed funds. In such a situation, the assessee gets support from the decision in Rajasthan state warehousing corporation vs CIT (242 ITR 450)(SC), CIT vs Reliance Utilities and Power Ltd. (313 ITR 340)(Bom.), CIT vs Hero Cycles 323 ITR 518 (P&H) and various decisions of the Tribunal mentioned at page-5 of the impugned order. It is further noticed that the assessee itself offered an amount of Rs.18,12,188/- being 1/2% of the average value of the investment as per rule 8D(2)(iii) of the rules, therefore, considering the aforementioned decisions, we find no infirmity in the impugned order. The same is affirmed.

Finally, the appeal of the Revenue is dismissed.

This order was pronounced in the open court in the presence of ld. representatives from both sides at the conclusion of the hearing on 28/04/2016.