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TMI Blog2017 (11) TMI 1644X X X X Extracts X X X X X X X X Extracts X X X X ..... e, FCA By Respondent : Shri Saurabh Kumar, Adl. CIT(DR) O R D E R Per Waseem Ahmed, AM By way of this Miscellaneous Application the assessee is seeking rectification of the order passed by the Hon ble I.T.A.T. vide order dated 10th March, 2017 on the ground that there is a mistake apparent from the record. 2. The ld. AR submitted as follows :- 2. In Ground Nos. 1,2,3 4 of the Petitioner's appeal it had objected to the CIT (A)'s order confirming AO's order making disallowance u/s 14A read with Rule 8D(2)(ii) (iii) amounting to ₹ 17,15,98,000/-. The amount disallowed by the AO u/ s 14A inter-alia included interest disallowance of ₹ 1,573.03 Lacs and Administrative Expenses of ₹ 143.00 Lacs. 3. In Para - 7.1 of the appellate order dated 10.03.2017 the Ld. ITAT dealt with the issue of disallowance u/s 14A read with Rule 8D(2). The ITAT noted that the Petitioner had offered the disallowance only in respect of administrative expenses, under Rule 8D(2)(iii), but no disallowance was offered towards interest as required under the provisions of Rule 8D(2)(ii). The Tribunal further observed that no documentary evidence submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee we find that as on 31.03.2007 the total investment are about ₹ 295.9 crore but as against this the share capital and reserves and surplus are about ₹ 1734 crore. Therefore, it can be assumed that the surplus funds of the assessee on which it is not required to pay interest are deployed in the investments from which exempt income is earned. Since borrowed funds prima-facie do not appear to be invested in the investments therefore no disallowance can be made u/s 14A out of the interest expenses. 6. From the foregoing it is apparent that the CIT (A) had recorded a categorical finding that the Petitioner's own funds in the form of capital reserves as on 31.3.2007 were ₹ 1,734 crores, whereas investments were only about ₹ 295.90 crores and therefore it had to be assumed that the surplus funds on which assessee was not required to pay interest were deployed in the M.A.No.108/Kol/2017 a/o ITA No.786/Kol/2013 M/s. Essel Mining Inds. Ltd A.Y.2008-09 3 investments from which exempt income was earned. The CIT (A) further held that since borrowed funds prima- facie did not appear to be invested in the investments therefore no interest disallowance u/s 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen by 31.03.2008 the net investment in shares securities had recorded net decrease by ₹ 12.27 crores meaning thereby no incremental investment was made during F.Y. 2007-08. 8. The Petitioner submits that even though all these material facts figures were available before the Hon'ble Tribunal there is no discussion about these facts in Para 7.1 of the Hon'ble Tribunal order. The Petitioner further finds that in deciding the issue of applicability of Rule 8D(2)(ii) the Hon ble Tribunal neither considered nor dealt with the findings recorded by the CIT(A) upheld by the ITAT for the A.Y. 2007-08 even though these findings had material bearing on the decision for the A.Y. 2008-09. The Petitioner submits that non consideration of the relevant material facts as also non application of the findings recorded by the appellate authorities in the orders for the A.Y. 2007-08, having bearing on the issue in A.Y. 2008-09; was a mistake apparent from record within the meaning of Sec. 254(2) of the I.T. Act. 3. On the other hand, the ld. DR vehemently supported the order of the Hon ble ITAT. 4. We have heard the rival contentions and perused the materials available on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has said that though Rule 8D will not apply to assessment years prior to assessment year 2008-09 but for earlier years the disallowance u/s. 14A should be estimated on a reasonable basis. In the case of the assessee we find that as on 31.03.2007 the total investment are about ₹ 295.9 crore but as against this the share capital and reserves and surplus are about ₹ 1734 crore. Therefore, it can be assumed that the surplus funds of the assessee on which it is not required to pay interest are deployed in the investments from which exempt income is earned. Since borrowed funds prima-facie do not appear to be invested in the investments therefore no disallowance can be made u/s.14A out of the interest expenses. As regards the administrative and other expenses which can be ascribed to the exempt income it is seen that in recent judgment Hon'be ITAT, Kolkata has decided that one percent of the exempt income can be taken as related to administrative expenses. The assessee has already disallowed one percent of the dividend income amounting to ₹ 3,99,203/- in its computation of income. Therefore, no further disallowance is required to be made u/s 14A. Hence I delete the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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