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TMI Blog2016 (3) TMI 312X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of Centrum Direct Ltd. [2016 (3) TMI 233 - ITAT MUMBAI], we concur with the contention of the assessee that no disallowance of interest can be made u/s 14A r.w. Rule 8D of the Act. - Decided in favour of assessee - ITA NO. 7708/MUM/2012, ITA NO. 82/MUM/2013 - - - Dated:- 29-1-2016 - SHRI JASON P. BOAZ, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER For The Assessee by : Shri J.D. Mistry and Shri Surendra Nijsure For The Revenue by : Shri Prakash Ojha, DR ORDER PER JASON P. BOAZ, AM : These are cross appeals, by Revenue and the Assessee, directed against the order of the CIT(Appeals)-4, Mumbai dt. 5.10.2012 for Asst. Year 2009-10. 2. The facts of the case, briefly, are as under :- 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een drawn that the entire investments have been made from the owned funds and therefore no disallowance should have been made u/s 14A and Rule 8D. 3) Without prejudice to above grounds of appeal, the learned CIT(A) erred in law and on facts in ignoring that for the purpose of computing the disallowance under Rule 8D following adjustments were required to interest expenditure and investments: a. that there was interest income of ₹ 3,49,97,157/- as against the interest expenses and as such only the net interest should have been considered for the purpose of computation under Rule 8D. b. that the interest on a bank facility taken for trading in bonds and the income from which was chargeable to the Income Tax Act and as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o disallowance u/s 14A of the Act was made as the assessee had utilized its own surplus funds for investments and that no expenditure had been incurred by the assessee for earning the exempt dividend income. The AO, however, did not accept the assessee‟s contentions and proceeded to compute disallowance of ₹ 1,51,10,827/- under Rule 8D of the Rules. 6.2 On appeal before the ld. CIT(A), the assessee reiterated the submissions put forth before the AO that it has adequate own surplus funds in the form of share capital and free reserves and therefore no disallowance of interest u/s 14A r.w Rule 8D(2)(ii) was warranted. The ld. CIT(A), however, upheld the disallowance of interest as he was of the view that the decision of the Hon& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the ld. CIT(A) on the above issues. 6.5.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial pronouncements cited. It is seen from the details placed before us, that the assessee has shown that in the period under consideration it has huge surplus funds i.e. from share capital and reserves and surplus, far in excess of the investments and therefore it can be reasonably presumed that no interest bearing funds have been diverted for making these investments in tax free securities. We find that the Hon‟ble Jurisdictional High Court in the case of CIT v. HDFC Bank Ltd. in ITA No. 330 of 2012 dt. 23.7.2014 at paras 4 and 5 thereof has laid down the propositio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t sr. no. 3(a) to (d) of this appeal. 8. In the result, the assessee‟s appeal for Asst. Year 2009-10 is partly allowed. Revenue s appeal for Asst. Year 2009-10 in ITA No. 82/Mum/2013 9. In this appeal revenue has raised the following grounds : 1. The order of the CIT(A) is opposed to law and facts of the case. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in excluding investments made in foreign company and investments toward share application money from the calculation of disallowance u/s 14A r.w.s. 8D overlooking the fact that there investment relate to income not chargeable to tax and were correctly included by the AO in the calculation. 3. For these and other grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance u/s 14A r.w.r 8D(2)(iii) of the Rules to include only those investments income from which is exempt and to verify the assessee‟s claim that the investments of ₹ 6,74,30,675/- are in respect of such securities from which exempt income is not generated and then exclude them from the opening and closing value of investment for computing the said disallowance. We, consequently, dismiss ground no. 2 of Revenue‟s appeal. 12. In the result, revenue‟s appeal for Asst. Year 2009-10 is dismissed. 13. To sum up, the assessee‟s appeal for Asst. Year 2009-10 is partly allowed and revenue‟s cross appeal is dismissed. Order pronounced in the open court on 29th January, 2016. - - TaxTMI - TMITax - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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