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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI N.K. BILLAIYA & SHRI AMARJIT SINGH
आदेश / O R D E R
PER N.K. BILLAIYA, AM:
This appeal by the Revenue is preferred against the order of the Ld. CIT(A)-7, Mumbai dated 30.4.2012 pertaining to Assessment year 2009-10.
The sole grievance of the Revenue is that the Ld. CIT(A) erred in deleting the disallowance made u/s. 14A to the extent of Rs.22,52,123/- under rule 8D(2)(ii) of the Act.
The assessee is in the business of finance and also trading in shares and securities. While scrutinizing the return of income, the Assessing Officer noticed that the assessee has claimed dividend income of Rs. 3,535/- as exempt from tax. The AO further noticed that the assessee suo moto disallowed Rs. 61,093/- u/s. 14A of the Act. The AO was of the opinion that the disallowance is not as per Rule 8D of the Act. Accordingly, the AO proceeded by computing the disallowance as per Rule 8D and computed the same at Rs. 23,65,091/- and after deducting the suo moto disallowance of Rs. 61,093/- the AO made an addition of Rs. 23,03,998/-.
The assessee carried the matter before the Ld. CIT(A) and strongly submitted that it has paid up capital and reserves far in excess of the investments made in the shares and therefore the ratio laid down by the Hon’ble Jurisdictional High Court in the case of CIT Vs Reliance Utilities and Power Ltd. 313 ITR 340 (Bom) squarely apply. The Ld. CIT(A) found force in the contention of the assessee and drawing support from the decision of the Hon’ble High Court of Bombay (supra), the Ld. CIT(A) directed the AO to restrict the disallowance to the extent of 0.5% of average value of investment deleting the proportionate interest of Rs. 22,52,123/-.
Aggrieved by this, the Revenue is before us.
The Ld. Departmental Representative strongly stated that it is for the assessee to demonstrate that on the date of investment, it has surplus investible fund. Blanket reliance on the decision of the Hon’ble High Court of Bombay is uncalled for. The representative of the assessee filed a written submission stating the same thing which was stated before the Ld. CIT(A).
We have given a thoughtful consideration to the orders of the authorities below. Undoubtedly, the Ld. CIT(A) deleted the addition on account of proportionate interest, drawing support from the decision of the Hon’ble High Court in the case of Reliance Utilities and Power Ltd (supra). However, we find force in the contention of the Ld. DR. The assessee must demonstrate the availability of surplus investible fund on the date of investment. We, accordingly restore this issue to the file of the AO. The assessee is directed to demonstrate the availability of surplus funds on the date of investment and the AO is directed to decide the issue afresh after considering the details in the light of the decision of the Hon’ble High Court of Bombay in the case of Reliance Utilities and Power Ltd (supra).
In the result, the appeal filed by the Revenue is allowed for statistical purpose.
Order pronounced in the open court at the time of hearing on 28th October, 2015.