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TMI Blog2017 (3) TMI 1480X X X X Extracts X X X X X X X X Extracts X X X X ..... essee had borrowed the funds but on the other hand, the assessee has sufficient interest free funds available with it, which is apparent from the copy of balance sheet filed by the assessee. The Hon’ble Bombay High Court in CIT Vs. HDFC Bank Ltd. (2014 (8) TMI 119 - BOMBAY HIGH COURT ) have clearly laid down that in such cases, where the assessee has sufficient capital available with it, no disallowance was to be made out of interest expenditure under section 14A of the Act. Applying the ratio laid down by the Hon’ble Bombay High Court, we hold that no disallowance is to be made out of balance interest expenditure of 5,80,523/-. The ground of appeal No.2 raised by the assessee is thus, allowed. Disallowance of part of administrative expenses under section 14A - Held that:- Applying th e ratio laid down by the Hon’ble Bombay High Court in the case of Godrej 50,000 /-. Accordingly, we partially allow the claim of assessee and ground of appeal No.3 raised by the assessee is thus, partly allowed. The grounds of appeal raised by the assessee are thus, partly allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... the case and in law, the Id. Commissioner of Income-tax (Appeal) erred in holding that entire borrowed funds are used for the purpose of purchase and sale of shares which is investment activity and hence interest so paid on such borrowing is not deductible by virtue of provisions of sec. 14A of the Income Tax Act. 3. Section 14A disallowance Restricting disallowance of administrative and common expenses only at 50% by invoking provisions of section 14A was excessive and unreasonable [Vide Para No. 2.1.26 on Page No.11 of the Order] On facts, in the circumstances of the case and in law, the Learned Commissioner of Income-tax (Appeals) erred confirming disallowance of common and administrative expenses by invoking provisions of Sec 14A of the Act and restricting disallowance at 50% by presuming and thereby holding that only 50% of the activities of the appellant is for business and that balance 50% of the activities are for investment purpose. 3. The issue raised in the present appeal is against the disallowance made under section 14A of the Act. 4. Briefly, in the facts of the case, the assessee for the year under consideration had furnished return of income declaring total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e before the CIT(A) that at best some reasonable disallowance should be made as made in the hands of other assessee. Without prejudice, the assessee claimed that the disallowance, if any, should be restricted to 5% or 10% of the expenditure of ₹ 1,99,768/- i.e. after excluding the gain arising on sale of NTPC shares which was major income under the head 'Long Term Capital Gains'. The CIT(A) noted the investment made in shares by the assessee and the income declared by the assessee under various heads of income and concluded that the assessee was carrying out the activities as an investor and not as trader in shares. The assessee had tabulated the total expenditure of ₹ 32,98,760/- in Profit & Loss Account and explained that the interest expenditure of ₹ 21,52,504/- was incurred on specific shares and the same should be excluded. The balance interest expenditure was claimed to be utilized for the purpose of investment on which income from short term capital gains or loss has been shown and hence, no disallowance. However, the CIT(A) held that the entire amount of interest of ₹ 27,33,027/- was to be disallowed under section 14A of the Act. The CIT(A) held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee and since the funds were borrowed for the purpose of investment in RPL shares, then there is no merit in disallowance made of interest expenditure of ₹ 21,52,504/-. The learned Authorized Representative for the assessee in this regard placed reliance on the ratio laid down by the Hon'ble Bombay High Court in CIT Vs. M/s. Delite Enterprises in Income Tax Appeal No.110 of 2009 , judgment dated 26.02.2009. With regard to disallowance of balance interest expenditure of ₹ 5,80,523/-, the learned Authorized Representative for the assessee pointed out that loans were borrowed for business purposes and in any case, the assessee had about ₹ 51 crores as working capital which was sufficient to make investment and placing reliance on the ratio laid down in CIT Vs. HDFC Bank Ltd. reported in 366 ITR 505 (Bom), there was no merit in making any disallowance under section 14A of the Act. The third issue in the present appeal is against restricting administrative and common expenses which is claimed to be at higher side, in view of the ratio laid down by the Hon'ble Bombay High Court in the case of Godrej & Boyce Manufacturing Co. Ltd. reported in 194 TAXMAN 203 (Bom). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... funds but on the other hand, the assessee has sufficient interest free funds available with it, which is apparent from the copy of balance sheet filed by the assessee. The Hon'ble Bombay High Court in CIT Vs. HDFC Bank Ltd. (supra) have clearly laid down that in such cases, where the assessee has sufficient capital available with it, no disallowance was to be made out of interest expenditure under section 14A of the Act. Applying the ratio laid down by the Hon'ble Bombay High Court, we hold that no disallowance is to be made out of balance interest expenditure of ₹ 5,80,523/-. The ground of appeal No.2 raised by the assessee is thus, allowed. 13. Now, coming to the last issue of disallowance of part of administrative expenses under section 14A of the Act. Applying th e ratio laid down by the Hon'ble Bombay High Court in the case of Godrej & Boyce Manufacturing Co. Ltd. (supra), we direct the Assessing Officer in restricting the disallowance under section 14A of the Act on account of administrative expenses to ₹ 50,000 /-. Accordingly, we partially allow the claim of assessee and ground of appeal No.3 raised by the assessee is thus, partly allowed. The grounds of appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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