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Income Tax Appellate Tribunal, MUMBAI BENCHES “J”, MUMBAI
Before: Shri Joginder Singh & Shri Rajendra
आदेश / O R D E R Per Joginder Singh (Judicial Member)
The assessee is aggrieved by the impugned order dated 21/07/2014 of the ld. First Appellate Authority, Mumbai. The only ground raised in this appeal pertains to disallowing a sum of Rs.1,38,29,156/- u/s 14A of the Income Tax Act, 1961 (hereinafter the Act) read with rule 8D of the Income Tax Rules 1962, against the dividend income of Rs.70,03,835/-.
During hearing, at the outset, the ld. counsel for the assessee, Shri Rishabh Shah, claimed that the impugned issue is covered in the case of the assessee, for A.Y. 2009-10 (ITA No.964/Mum/2013) order dated 15/01/2015. This factual matrix was not conroverted by ld. DR, Shri Ashish Heliwal.
2.1. We have considered the rival submissions and perused the material available on record. In view of the above, we are reproducing hereunder, the relevant portion from the aforesaid order of the Tribunal, dated 15/01/2015 for ready reference and analysis:-
“This appeal by the assessee is directed against the order of the Ld. CIT(A)-9, Mumbai, dt.15.10.2012 pertaining to A.Y. 2009-10. 2. The sole grievance of the assessee is that the ld. CIT(A) erred in confirming the disallowance of Rs.60,24,063/- made u/s 14A of the Act by the Assessing Officer invoking Rule 8D.
M/s JSW Power Trading Company Ltd.
The assessee is a non-banking finance company. The return for the year was selected for scrutiny assessment. During the course of the scrutiny assessment, the Assessing Officer noticed that the assessee has received exempt dividend income of Rs. 1,19,29,077/-. The AO further found that the assessee. has disallowed Rs. 1,81,532/- being 1% of expenses and also demat charges at Rs. 5,618/-. The AO was not convinced with the disallowance made by the assessee and therefore proceeded by computing the disallowance as per Rule 8D. The disallowance was computed at Rs. 62,05,595/-. Since the assessee has suo- motu disallowed Rs.1,81,532/-, the AO disallowed Rs. 60,24,063/-.
The assessee carried the matter before the Ld. CITCA) but without any success.
Before us, the Ld. Counsel for the assessee stated that the lower authorities have not appreciated the fact properly. It is the say of the Ld. Counsel that the entire investments have been made out of own funds and borrowed funds have not been utilized for making the investments. The Ld. Counsel referred to the documentary evidences brought on record.
Per contra, the Ld. Departmental Representative supported the orders of the Revenue authorities.
We have carefully perused the orders of the authorities below and the relevant documentary evidences brought on record before us. The assessee has made investments in financial year 2005-06 to the tune of Rs. 19.67 crores which was out of share capital received from holding company M/s. JSW Energy Ltd. amounting to Rs. 20 crores. During the year under consideration, the assessee has made investment of Rs. 125 crores, the same has been made out of the share capital received from the holding company M/s. JSW Energy Ltd. Evidence on record clearly shows that the entire investments have been made out of own funds and simply because the assessee has borrowed funds in its balance sheet, that does· not mean that M/s JSW Power Trading Company Ltd.
the assessee has made investments out of borrowed capital. However, at the same time, we find that the assessee has made disallowance @ 1 %. In our considered view, this is on the lower side. We, therefore, direct the AO to restrict the disallowance on account of indirect expenses @ 5% of the dividend income which comes to Rs. 5,96,453/-. Since the assessee has suo-motu disallowed Rs.1,81,532/-, the AO is directed to restrict the disallowance at Rs.4,14,921/-.
In result, the appeal filed by the assessee is partly allowed.” 2.2. During hearing before us, the ld. counsel for the assessee, contended that the aforesaid reasoning contained the order may be followed in the present assessment year also. It is noted that for A.Y. 2009-10 also, there is observation that the entire investment was made out of own funds and simply because the assessee had borrowed funds in the balance sheet does not mean that the assessee made investment out of borrowed capital. It was further observed that the assessee made disallowance at the rate of 1%, which was considered to be towards lower side, therefore, the Assessing Officer was directed to restrict the disallowance on account of indirect expenses at the rate of 5% of the dividend income and since the assessee had suo- motu disallowed Rs.1,81,532/-, the Assessing Officer was directed to restrict the disallowance at Rs.4,14,921/-. The ld. DR had also no objection to the aforesaid reasoning, if followed. Considering the totality of facts, the ld. Assessing Officer is directed to consider the aforesaid reasoning and M/s JSW Power Trading Company Ltd. to restrict the disallowance accordingly. Appeal of the assessee, is, therefore, partly allowed.
Finally, the appeal of the assessee is partly allowed.
This order was pronounced in the open in the presence of ld. representatives from both sides at the conclusion of the hearing on 29/03/2016.