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TMI Blog2010 (10) TMI 214X X X X Extracts X X X X X X X X Extracts X X X X ..... the extent of 5% of the total exempt income earned by the assessee - The assessee’s appeal are accordingly allowed Disallowance pf amortization of premium paid by the assessee for leasehold land – Which is squarely covered against the assessee by the orders of the Tribunal in assessee’s own case for earlier years i.e. A.Y. 2000-01 to 2003-04 - Dismiss the assessee’s appeal Depreciation on the opening written down value of the block of assets - The appellate order for immediately preceding assessment year is also squarely covered against the assessee by the decision of the Tribunal in assessee’s won case for A.Y. 2003-04 rendered vide its order dated 30.9.2008 in ITA No. 4197/Mum/06 wherein a similar claim of the assessee has been disallowed by the Tribunal. - ITA No. 1090/Mum/09 - - - Dated:- 8-10-2010 - SHRI P.M. JAGTAP, SHRI VIJAY PAL RAO, JJ. Appellant by Shri F.V. Irani Respondent by Mrs. Neeraj Vinay Bansal ORDER PER P.M. JAGTAP, A.M. This appeal by the assessee is directed against the order of ld. CIT(A) X, Mumbai dated 23.1.09. 2. Ground No. 1 to 6 raised in this appeal involve a common issue relating to the disallowance made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, it was contended on behalf of the assessee before the A.O. that interest expenditure incurred by it was not at all attributable to earning of dividend income and no disallowance out of the same could be made u/s 14A. 5. The A.O. did not find merit in the submissions made on behalf of the assessee company. According to him, although the assessee is claimed to have made the investment in shares out of surplus funds, it could have utilized the said payments for repaying the borrowing instead of making investment in shares. He held that it was thus an in-direct case of diversion of borrowed funds by the assessee for making investment in shares so as to earn dividend income and since such dividend income was exempt from tax, interest attributable to the borrowed funds utilized for making investment in shares was liable to be disallowed u/s 14A. For this conclusion, he relied on the decision of Hon ble Punjab Haryana High Court in the case of CIT vs. Abhishek Industries Ltd. 286 ITR 1. He also noted in this context that the assessee company had own capital and reserve funds of Rs. 335.36 crores as against investment in shares made at Rs. 335.77 crores as on 31.3.05. He further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earing before us, the ld. Counsel for the assessee has taken us through the copies of such submissions placed in his paper book to demonstrate that the entire amount of borrowed funds was utilized for the purpose of its business by the assessee company and the investment in shares was made by it out of its own funds. As pointed out by him from the assessment orders for the earlier years including the assessment order passed for the immediately preceding year i.e. 2004-05, the A.O. himself had accepted after verification of the relevant record that the borrowed funds were entirely utilized by the assessee for the purpose of its business and investment in shares was made by it out of its own funds. As further pointed out by him from the copy of fund flow statement for the year under consideration placed at page 19 of the paper book, funds to the tune of Rs. 46 crores were generated from operation of the assessee company which were more than the net investment of Rs. 40.60 crores made in that year. He has pointed out that the finding given by the A.O. in his order that total investment made by the assessee company in shares at Rs. 335.77 crores as on 31.5.05 was more than its own capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in shares and funds was made by the assessee out of the dividend proceeds and not out of borrowed funds and in view of this finding of fact, it was held by the Hon ble Punjab Haryana High Court that the disallowance u/s 14A was not sustainable. Keeping in view the said decision of the Hon ble Punjab Haryana High Court in the case of Hero Cycles Ltd. (supra) and having regard to the facts of the case, we hold that the disallowance made by the A.O. out of interest expenses u/s 14A and confirmed by the ld. CIT(A) is not sustainable. The same is therefore deleted. 8. As regards the issue relating to the disallowance out of common administrative expenses u/s 14A , it is observed that this disallowance made by the A.O. at Rs. 25,48,350/- was enhanced by the ld. CIT(A) to Rs. 1,40,52,000/- by applying Rule 8D of Income Tax rules 1962. As held by the Hon ble Bombay High Court in the case of Godrej Boyce Mfg. Co. Ltd. (ITA No. 626 of 2010 dtd. 12.08.2010), Rule 8D of the Income Tax Rules 1962 is applicable only prospectively i.e. from A.Y. 2008-09. As further held by the Hon ble Bombay High Court in the said case, the quantum of disallowance u/s 14A for the years earlier to A.Y. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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