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TMI Blog2016 (1) TMI 1080X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, the amount disallowable as per Rule-8D can be ₹ 1,27,601/- against the calculation of ₹ 2,31,140/- , thus, the addition is restricted to ₹ 1,03,539/- (Rs.2,31,140-1,27,301) - Decided partly in favour of assessee - ITA No.868/Mum/2015 - - - Dated:- 4-1-2016 - Shri Joginder Singh, Judicial Member For The Assessee : None For The Revenue : Shri A.K.Dhondial JCIT-DR ORDER The assessee is aggrieved by the impugned order dated 14/11/2014 of the Ld. First Appellate Authority, Mumbai. Only ground raised in this appeal pertains to sustaining the disallowance of ₹ 2,31,140/- u/s 14A of the Income Tax Act, 1961 (hereinafter the Act) read with Rule 8-D of the I.T. Rules. 2. During hearing, nobody ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re was no direct expenditure incurred and as mentioned earlier investment was made out of own funds. It is also noted that notwithstanding with the calculation made by the Assessing Officer, he included the debit balance in profit loss account while calculating the total asset. Undisputedly, the assessee furnished the copy of bank statement before the ld. First Appellate Authority to prove that own funds were invested for generating the income and no borrowed funds/OD was used in buying the mutual funds. Thus, the decision from Hon ble Punjab Haryana High Court in Hero Cycles Ltd. 323 ITR 518 (P H) and jurisdictional High Court in K. Raheja Corporation Pvt. Ltd. (ITA No.1260 of 2009) comes to the rescue of the assessee. The relevant fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue has preferred this appeal under Section 260A of Income Tax Act, 1961 (for short, the Act ) for the assessment year 2004- 05 against the order of Income Tax Appellate Tribunal, Chandigarh Bench 'B', passed in ITA No. 247/Chandi/2008 on 4.7.2008, proposing to raise following substantial question of law:- (i) Whether on the facts and in law, the Hon'ble ITAT was legally justified in deleting the disallowance of ₹ 3,48,04,375/- under Section 14A of the Income-tax Act, 1961 by ignoring the evidence relied on by the Assessing Officer and holding that a clear nexus has not been established that the interest bearing funds have been vested for investments generating tax free dividend income. 2. The assessee is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... later on invested in the investments in question. Such funds are ostensibly without any burden of interest expenditure. Thus, on facts we do not find any evidence to show that the assessee has incurred interest expenditure in relation to earning to the tax exempt income in question. We find that all the details in question were produced before the Assessing Officer and the CIT (Appeals) also. The entire evidence in this regard, which is submitted before the lower authorities have been compiled in the paper book, to which we have already adverted to in the earlier part of the order. Therefore, merely because the assessee has incurred interest expenditure on funds borrowed in the main unit, Ludhiana, it would not ipso-facto invite the disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e revenue that directly or indirectly some expenditure is always incurred which must be disallowed under Section 14A and the impact of expenditure so incurred cannot be allowed to be set off against the business income which may nullify the mandate of Section 14A, cannot be accepted. Disallowance under Section 14A requires finding of incurring of expenditure where it is found that for earning exempted income no expenditure has been incurred, disallowance under Section 14A cannot stand. In the present case finding on this aspect, against the revenue, is not shown to be perverse. Consequently, disallowance is not permissible. We have taken this view earlier also in ITA No. 504 of 2008 (Commissioner of Income Tax Chandigarh II vs. M/s Winsome ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses to earn the exempt income. So far as applicability of Rule-8D is concerned, since, assessment year involved is 2011-12, therefore, Rule-8D will be applicable. However, since, no borrowed funds were utilized for making the investment and the assessee suo-moto made the disallowance, we find merit in the appeal of the assessee, therefore, the amount disallowable as per Rule-8D can be ₹ 1,27,601/- against the calculation of ₹ 2,31,140/- , thus, the addition is restricted to ₹ 1,03,539/- (Rs.2,31,140-1,27,301), consequently, the appeal of the assessee is partly allowed. Finally, the appeal of the assessee is partly allowed. This order was pronounced in the open Court in the presence of DR at the conclusion of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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