PURVAG S SHAH,MUMBAI vs. ACIT 21(1), MUMBAI

O R D E R PER ASHWANI TANEJA (ACCOUNTANT MEMBER)

These appeals involve identical issue and pertain to the connected assessees, and therefore, these appeals were heard together and are being disposed of by this common order.

“1. Commissioner ofC.I.T. (A) erred in confirming further addition made by Assessing Officer uls.l4A of Rs 4,42,074/· without considering fact that interest expenses is related to business activity of appellant and there is no borrowing made for investment.

(i) To allow the claim of the appellant that the group investment should not be considered while applying Rule 80 (2)(iii).

(ii) To direct AO to recalculate disallowance.”

3. During the course of hearing it was submitted by the ld.counsel that disallowance u/s 14A was made only u/s 8D(2)(ii) & (iii) and no disallowance was made under clause (i) of Rule 8D. It was submitted that own funds of the assessee were more than the amount of investment made in the tax free securities and the investment made was mostly made in the strategic companies, therefore, no disallowance was called for.

3 4543/Mum/2011 5. We have gone through the orders of the lower authorities as well as submissions made by both the parties before us. It is noted that perusal of the balance-sheet shows that amount of share capital and unsecured loan put together are more than the amount of investments. It is submitted by the ld.counsel that unsecured loans are interest free loans as no interest has been paid on those loans. But nothing was produced before us to show that unsecured loans are not interest bearing loans. Similarly with regard to argument of the ld.counsel that investment was made substantially in the companies for strategic reasons as the investee companies were group companies; it is noted that this pleading has not been examined at the lower level and requisite facts are not available before us to examine the veracity of the submissions made before us. Under these circumstances we find it appropriate to send this issue back to the file of the Assessing Officer. The assessee shall file requisite details and evidences so as to enable the Assessing Officer to ascertain the correct facts and examine all the submissions of the assessee. The Assessing Officer shall give adequate opportunity of hearing to the assessee and shall objectively examine all the contentions of the assessee as well as details and evidences filed by the assessee, that may be filed by the assessee. The assessee is free to raise all legal and factual issues. These grounds may be treated as partly allowed for statistical purpose.

“I. Commissioner of C.l.T. (A) erred in confirming further addition made by Assessing Officer u/s.14A of Rs 10,10,3861· without considering fact that interest expenses is related to business activity of appellant and there is no borrowing made for investment.

4 4543/Mum/2011 2. Commissioner of C.l.T. (A) erred in confirming application of Rule 80(2)(ii) of section 14A, without considering the fact that Net worth of appellant is more than I investments and no new Investment are made by Appellant by borrowing.

3. Commissioner of C.l.T. (A) erred in confirming application of Rule 80 (2)(iii) being 0.5% of average investment by ignoring fact that all investments are in group companies for maintaining control of group and investment was out of own net worth and appellant need not incur any administrative expenses to earn exempt income.

4. The Appellant plead before Honourable ITA T to direct the Assessing Officer to: - (i) To allow the claim of the appellant that the group investment should not be considered while applying Rule 80 (2)(iii). (ii)To restrict disallowance as per return of Income filed by the appellant.”