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TMI Blog2018 (4) TMI 1707X X X X Extracts X X X X X X X X Extracts X X X X ..... RT] and other case, as cited and placed/mentioned in the synopsis. The assessee having the business of lending, was correct in claiming the deduction, which was claimed at net figures because, the interest has got embedded in the specific costs. Whether exemption of interest under section 10(23G) of the Act should be granted after deducting actual interest cost instead of notional interest cost ? - HELD THAT:- As decided in assessee's own case [ 2013 (8) TMI 1107 - ITAT MUMBAI] and HDFC BANK LTD. [ 2014 (8) TMI 119 - BOMBAY HIGH COURT] we hold that deduction for the interest cost incurred was to be taken only in relation to earmarked borrowings utilized by the assessee for the purpose of granting loans to the enterprises, interest income whereof is exempt u/s 10(23G) of the Act for the purpose of computing net interest income eligible for deduction u/s 10(23G) of the Act. Exemption under section 10(34) of the Act is to be granted at dividend income without deducting notional interest cost and estimated managerial expenses - HELD THAT:- As decided in own case [ 2015 (11) TMI 1305 - ITAT MUMBAI] it is seen by us that assessee s own funds exceed the investment made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax Addl.CIT, Range-3(1), Mumbai (in short DCIT ACIT ) for the A.Yrs 2006-07 2007-08 vide different orders dated 08.01.2008 under section 143(3) of the Income Tax Act, 1961(hereinafter the Act ). 2. The first common issue in these appeals of the assessee is against the orders of CIT(A) confirming the action of the AO in disallowing the exemption under section 10(23G) of the Act in respect of interest income earned by bank. For this assessee has raised the identically worded grounds in both the years and facts and circumstances are also identical as conceded by both the sides. Hence, we will take the grounds from AY 2006-07 and decide the issue. The following are the grounds raised by the assessee: -. 1. RE: Quantification of Interest income exempt under section 10(23G) of the Income Tax Act, 1961 (the Act). 1.1 It is humbly prayed that it should be held that the exemption under Section 10(23G) of the Act is to be granted at interest income earned by the Bank and accordingly, the exemption granted under section 10(23G) of the Act is to be enhanced by ₹ 86,552,847/- and the income assessed is to be red ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g exemption of interest income and the action of the A.O in quantifying interest cost is proper in law. 6. Accordingly, I direct the AO. to grant the exemption of interest income under clause (23G) of Section 10 of the Act at net of interest cost as done by the A.O. and accordingly grant exemption at ₹ 2,00,00,354/-, subject to further modification, if any, arising on account of furnishing by the appellant of requisite approval accorded by the central Government to two borrowers. Aggrieved, assessee is in appeal before Tribunal. 4. At the outset, the learned Counsel for the assessee Miss Arthi Visanji fairly stated that this issue is covered against assessee in assessee s own case for AY 2000-01 to 2002-03 in ITA No. 7361 to 7363/Mum/2005 order dated 14.08.2013 vide para 19 to 22 as under: -. 19. We have heard the rival contentions and the short issue before us is whether the exemption is to be allowed at ₹ 8,58,00,484/- or ₹ 6,70,94,603/-, as restricted by the AO. 20. From the details reproduced by the AO, we find that the impugned figures are expense of interest on lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeals of assessee is without prejudice to the above issue, is as regards to exemption of interest under section 10(23G) of the Act should be granted after deducting actual interest cost instead of notional interest cost. For this assessee has raised the identically worded grounds in both the years and facts and circumstances are also identical as conceded by both the sides. Hence, we will take the grounds from AY 2006-07 and decide the issue. The following are the grounds raised by the assessee: -. 2. RE: QUANTIFICATION OF DIVIDEND INCOME EXEMPT UNDER SECTION 10(34) OF THE ACT: It is humbly prayed that it should be held that the exemption under section 10(34) of the Act is to be granted at dividend income earned by the Bank and accordingly, the disallowance made of ₹ 3,53,60,107/- being the notional interest cost against dividend income and of ₹ 2,22,508/-, representing estimated managerial cost, by invoking the provisions of Section 14A of the Act should be deleted in its entirety and the income assessed is to he reduced accordingly. 7. At the outset, the learned Counsel for the assessee stated that this i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d was to be taken only in relation to earmarked borrowings utilized by the assessee for the purpose of granting loans to the enterprises, interest income whereof is exempt u/s 10(23G) of the Act for the purpose of computing net interest income eligible for deduction u/s 10(23G) of the Act. Thus, Ground No.1(a)(ii) and Ground No.2(a)(ii) are allowed. 8. Similarly, the assessee has also raised the common issue in both the appeals that the exemption under section 10(34) of the Act is to be granted at dividend income without deducting notional interest cost and estimated managerial expenses. We find that the Tribunal in assessee s own case for AY 2005-06 in ITA No. 347/Mum/2008 vide para 4.5 to 4.6 has considered this issue following AY 2000-01 to 2002-03 by observing in para 4.5 to 4.6 as under:- 4.5. We have gone through the orders of the lower. It is observed by us that this issue came up before the Hon ble Tribunal in assessee s own case in assessment years 2000-01 to 2002-03 in ITA No.7361 to 7363/Mum/2005. The relevant portion of this order is reproduced below: 34. We have heard the arguments of both the sides ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven directions to the AO to examine the facts and decide the matter and the AO on verification of details has excluded the interest expenditure for AY 2008-09 and 2010-11, while adjudicating the set aside the assessment. And even the Department has not preferred any appeal before ITAT against the directions of CIT(A). The AO while assessing the total income under section 143(3) of the Act for FY 2012-13 to AY 2015-16 has accepted that interest expenditure of the nature are to be excluded in quantifying the inadmissible interest expenditure under section 14A read with rule 8D(2) of the Rules. When these facts were confronted to the learned Departmental Representative, he conceded that the Revenue has accepted this position and Revenue has not preferred any appeal. 12. We have gone through the order of CIT(A) who has directed the AO to recompute the disallowance after excluding the interest paid on foreign currency borrowings which were utilized for foreign currency lending abroad or out of India. He observed in Para 2.10 to 2.13 as under:- 2.10 Without prejudice, the appellant has submitted that some adjustments need to be made while computing the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO to grant depreciation. For this Revenue has raised the following ground No. 2:- 2. On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in directing the A.O. to grant depreciation u/s. 32 of the I.T. Act at' 8,20,63,185/- instead of' 7,47,06,994/- as granted by the A.O. 15. We have heard the rival contentions and gone through the facts and circumstances of the case. We find from the orders of the lower authorities that the claim of assessee is based on the fact that the assessee was first treated as taxable entity in the FY 1999-2000 relevant to AY 2000-01 and thereafter the WDV assets held by it as on 01-04-1999 claimed to be the cost of acquisition decided by the Assessing Officer. This matter has been decided by CIT(A) relying on earlier years vide Para 3.2 as under: - 3.2. I have considered the submissions. I find from the records that the Ld. CIT(A) for A.Yr.1999-00 to 2006-07 has upheld the contention of the appellant in this regard. It has been held that there is no sanctity in reducing the WDV of the assets by notional depreciation in the years in which the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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