K . RAHEJA CORP P. LTD,MUMBAI vs. ASST CIT CEN CIR 29, MUMBAI
In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.
What did the Tribunal hold?
The Tribunal held that if the assessee has sufficient own funds, it should be presumed that investments were not made from borrowed funds. The disallowance under Section 14A cannot be made mechanically and cannot exceed the expenditure claimed.
What were the facts?
The assessee, a real estate developer, declared a certain income. The Assessing Officer (AO) disallowed Rs. 9.45 crores under Section 14A read with Rule 8D for investments made in shares, citing the use of borrowed funds.
What were the issues?
Whether the disallowance under Section 14A for investments made in shares is justified when the assessee has sufficient own funds and whether the disallowance was made mechanically.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Cases cited in this judgment(2)Show listHide list
Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.
- CIT v. Reliance Utilities & Power Ltd.2,118 citing313 ITR 340 · 2009 · HC
- Godrej & Boyce Mfg. Co. Ltd. v. DCIT1,183 citing328 ITR 81 · 2010 · HC · Read judgment
आयकर अपीलीय आयकर अपीलीय अिधकरण अिधकरण," ए” खंडपीठ खंडपीठ मुंबई मुंबई आयकर आयकर अपीलीय अपीलीय अिधकरण अिधकरण खंडपीठ खंडपीठ मुंबई मुंबई INCOME TAX APPELLATE TRIBUNAL,MUMBAI-“A”,BENCH सव"ी जोिग"दर "सह, "याियक सद"य एवं राजे"", लेखा सद"य Before S/ShJoginder Singh,Judicial Member & Rajendra,Accountant Member आयकर अपील सं./ITA No./6900/Mum/2011,िनधा"रण िनधा"रण वष" वष" /Assessment Year: 2008-09 िनधा"रण िनधा"रण वष" वष" M/s. K. Raheja Corporation Pvt. Ltd. ACIT , Central Circle-29 Raheja Tower, Plot No.C-30,G-Block, Opp. Mumbai. Vs. SIDBI, BKC ,Bandra (E),Mumbai-400 051. PAN:AAACP 0522 B (अपीलाथ" /Appellant) (""यथ" / Respondent) Revenue by: Shri Arvind Kumar Assessee by: Shri P.J. Pardiwala & Ms. Aarti Sathe सुनवाई क" तारीख / Date of Hearing: 04.04.2016 घोषणा क" तारीख / Date of Pronouncement: 04.04.2016 आयकर अिधिनयम अिधिनयम,1961 क" क" धारा धारा 254(1)केकेकेके अ"तग"त अ"तग"त आदेश आदेश आयकर आयकर आयकर अिधिनयम अिधिनयम क" क" धारा धारा अ"तग"त अ"तग"त आदेश आदेश Order u/s.254(1)of the Income-tax Act,1961(Act) अनुसार PER Rajendra A.M.- लेखा सद"य सद"य राजे"" राजे"" केकेकेके अनुसार लेखा लेखा लेखा सद"य सद"य राजे"" राजे"" अनुसार अनुसार Challenging the order dt. 25.08.2011of CIT(A) the assessee has filed the present appeal. Assessee-company,engaged in the business of real estate development and hotelier,filed its return of income declaring total income of Rs.38,25,67,357/-.The AO completed the assessment on 30.12.2012,u/s. 143(3) of the Act,detrmining the income of the assessee at Rs. 47.72 crores. 2.Effective ground of appeal is disallowance made u/s. 14A r.w.r Rule 8D of the Income tax Rules,1961(Rules),amounting to 9.45 crores.During the assessment proceedings,the AO found that assessee had received dividend of 5.93crores,that it had made investment of 141.80 crores in the shares of various companies,that the assessee had paid interest on borrowed funds.He asked the assessee as to why interest relatable to borrowed funds used in making investment in shares should not be disallowed u/s.14A of the Act.Vide,its letter dt. 22.11.2010,the assessee submitted that it had sufficient non-interest bearing funds that no disallowance of interest was called for,that the additions made by the AO,in the earlier years were deleted by the Tribunal/First Appellate Authority(FAA).However,the AO held that the assessee had made investment in shares of group companies,that it had used the borrowed funds for the purpose of business.Referring to the provisons of section 14 r.w.Rule 8D,the AO made a disallowance of Rs.9.45 Cores(Rs.8.77 Crores under rule 8D(ii)+ Rs.68.69 lakhs under Rule 8D(iii)of the Rules). 3.During the appellate proceedings before the FAA,the assessee argued that investment in shares had been made out of non interest bearing funds,that it had sold shares worth Rs.32.33 Crores.The assessee relied upon the case of Reliance Utilities and Power Ltd.(313ITR340). After considering the available material,the FAA referred to the judgment of Godrej & Boyce Mfg.Co.Ltd.(328 ITR 81) and held that the AO was not precluded from making a reasonable dlsallowance u/s.14A of the Act by making an estimate of attributable expenditure for these earlier years,that an attempt to make a distinction between borrowed and interest free funds for the purpose of section 14A was artificial.Finally,he upheld the order of the AO.
Before us,the Authorised Representative(AR)stated that the assessee had sufficient own funds,that the investment in shares,during the year under appeal was only a very small portion of the total available fund,that increase in investments was because of investment made in immovable properties.He relied upon the decisions/judgment of the Tribunal and Hon’ble High Court delivered in assessee’s own case(ITA/4431-4050/Mum/2000, ITA.s. 4759-60/Mum/2001,Income-tax appeal No.1260 of 2009).Departmental Representative (DR) supported the order of the FAA. 5.We find that the assessee had share capital of Rs. 60,48,00,000/-and reserves & surplus stood at Rs.1,74,67,67,552/-,whereas the investment was at Rs.2,06,66,62,442/-,that out of the said investment the assessee had made investment in properties also,that the fresh investment in the shares was not very huge,that it had made strategic invesment,that there was no evidence to prove that borrowed funds were utilised for making investment in shares.In our opinion,the settled position of law stipulate that the if the assessee has sufficient own funds then it should be presumed that investment was not made from borrowed funds. Considering the availability of funds we are of the opinion that the AO was not justified in disallowing interest expenditure.Similarly, disallowance as per the provisions of section 14A r.w.rule 8D of the Rules cannot be made in a mechanical manner.Thirdly,the disallowance cannot be more than the expenditure claimed by an assessee.We find that in the case of the assessee the Tribunal and the Hon’ble High Court had decided the identical issue against the AO,while deciding the appeal filed by the group concerns and the assessee itself . Respectfully, following the orders mentioned in para no.4 ,we decide the effective ground of appeal in favour of the assessee. As a result,appeal filed by the assessee stands allowed. फलतः िनधा"रती "ारा दािखल क" गई अपील मंजूर क" जाती है. Order pronounced in the open court on 4th April, 2016. आदेश क" घोषणा खुले "यायालय म" "दनांक 04 अ"ैल, 2016 को क" गई । जोिग"दर जोिग"दर "सह "सह /Joginder Singh) (राजे"" / RAJENDRA) जोिग"दर जोिग"दर "सह "सह "याियक सद"य / JUDICIAL MEMBER लेखा लेखा सद"य सद"य / ACCOUNTANT MEMBER लेखा लेखा सद"य सद"य मुंबई Mumbai; "दनांकDated :04.04.2016. Jv.Sr.PS. आदेश क" क" "ितिलिप "ितिलिप अ"ेिषत अ"ेिषत/Copy of the Order forwarded to : आदेश आदेश आदेश क" क" "ितिलिप "ितिलिप अ"ेिषत अ"ेिषत 1.Appellant /अपीलाथ"
Respondent /""यथ" 3.The concerned CIT(A)/संब$ अपीलीय आयकर आयु', 4.The concerned CIT /संब$ आयकर आयु' 5.DR “A ” Bench, ITAT, Mumbai /िवभागीय "ितिनिध, A खंडपीठ,आ.अ."याया.मुंबई 6.Guard File/गाड" फाईल स"यािपत "ित //// आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार Dy./Asst.
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