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TMI Blog2019 (10) TMI 703X X X X Extracts X X X X X X X X Extracts X X X X ..... s - HELD THAT:- We remand this issue back to the file of the AO, who will examine the facts of the case and will disallow the expenses relatable to exempt income by computing 0.5% of average value of investment under Rule 8D(2)(iii) of the Rules, only qua the investments which give exempt income. The AO will restrict the disallowance to that extent only. The issue of the assessee s appeal is restored back to the file of the AO. Addition made on account of interest income on accrual basis instead of due basis - HELD THAT:- CIT(A) allowed the claim of assessee by relying on the decision of Hon ble Bombay High Court on assessee s own case [ 2013 (2) TMI 893 - BOMBAY HIGH COURT ] as well as on various Tribunal judgments in assessee s own case Disallowance of broken period interest which was added as capital expenditure by the AO - HELD THAT:- Respectfully following the Tribunal decision in assessee s own case for earlier years, we upheld the order of CIT(A) deleting the disallowance of broken period interest. This issue of Revenue s appeal is dismissed. - ITA No. 669/Mum/2018, ITA No. 500/Mum/2018 - - - Dated:- 24-7-2019 - Sri Mahavir Singh, JM And Sri NK Pradhan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred in relying on Hon ble Bombay High Court judgement of Reliance Utilities Power Ltd. which is in context of disallowance of interest expenses under section 36(1)(iii) of the Act. 4. We have heard the rival contentions and gone through the facts and circumstances of the case. We noted that the first dispute is regarding disallowance of interest expenditure incurred by assessee for earning of exempt income under the provision of section14A of the Act read with Rule 8D(2)(ii) of the Rules, amounting to ₹ 4,08,90,000/-. The AO made the addition despite the fact that the assessee has explained before him the details of investment in shares on which tax free dividend has been earned and tax free funds available with the bank. The AO in the assessment order has nowhere stated that the assessee has invested the interest bearing funds in the instruments giving rise to exempt income. The CIT(A) deleted the addition after going through the fund position of the assessee and investment made. The relevant details are available in the order of CIT(A) which read as under: - Particulars Amount (Rs.) (in crore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of interest income on accrual basis instead of due basis. 7. At the outset, we noted that AO in the assessment order noted the fact that the assessee has credited interest to the profit and loss account by an amount of ₹ 1282,49,77,646/- but in the computation of income, the assessee reduced the same amount and added a sum of ₹ 1196,23,82,772/- being income / interest due/ received on investment during the year under consideration. The assessee treated the differential amount of ₹ 86,25,94,772/- attributable to the interest that accrued but did not become due. The AO did not accept the contention of the assessee and stated the matter is taken in further appeals before the High Court. The CIT(A) allowed the claim of assessee by relying on the decision of Hon ble Bombay High Court on assessee s own case as well as on various Tribunal judgments in assessee s own case vide Para 6.6 and 6.7 as under: - 6.6 The above issue has been decided in favour of the appellant for A.Y.2006-07 and A.Y. 2008-09 following the appellant's own order for A.Y.2005-06. Further, Hon'ble Bombay High Court vide orders bearing ITA No.1621of 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese securities. Hence, the AO required the assessee to explain as to why the same should not be disallowed i.e. broken period interest. The assessee made claim of deduction of ₹ 15,36,24,791/- being amount of broken period interest out of the disallowance for assessment year 2012-13 in the case of securities sold during that year. The AO noted that the assessee is not entitled for the claim of deduction as Revenue is contesting the appeal before the Hon ble High Court on this issue. The CIT(A) considering the decision of Hon ble Supreme Court in the case of CIT vs. Citi Bank NA in civil appeal No. 1549 of 2006 dated 12.08.2008 and also Hon ble Bombay High Court in the case of American Express vs. CIT (258 ITR 601) allowed the claim of assessee by observing in Para 9.4 to 9.8 as under: - 9.4 I have carefully considered the facts of the case. discussion of the AO in the impugned order as well as oral contention and written submission of the appellant. I find that the issue of broken period interest has been decided in favour of the assessee by the Hon ble Supreme Court in the case of CIT vs Citi Bank NA in Civil Appeal no. 1549 of 2006 dated 12.08.2008 wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision in case of HDFC Bank Ltd. For the sake of ready reference, the relevant portion of Hon ble ITAT's order is reproduced as under: Referring to Ground no. 5, LA Counsel for the assessee submitted that the same relates to the broken period interest debited to the Profit Loss Account and the same is required to be adjudicated in view of the judgment of the Hon'ble jurisdiction High Court in the case of GT vs. HDFC Bank Ltd in Income Tax Appeal No.330 of 2012, dated 23.7.2014. After hearing both the parties on this issue, we remand the Ground No.5 to the file of the AO as desired by the Id Representatives of both the parties for fresh adjudication. AO is directed to adjudicate this issue in the light of the said judgment of Hon'ble High Court (supra) complying with the ratio laid down in the said judgment on the issue under consideration. Accordingly, Ground no.5 raised by assesse is allowed for statistical purpose. 9.8 Similar issue has also been decided by my learned predecessor CIT(A) vide order barring Nos. CIT(A)-6/IT-189/2013-14 for A.Y.2011-12 and AY 2012-13 respectively wherein he has stated that since Hon ble ITAT ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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