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TMI Blog2019 (11) TMI 358X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Assessing Officer for deciding in view of the assessment for assessment year 2013-14 is rejected. CIT(A) on the issue in dispute is well reasoned and we do not find any error in the same. Accordingly, we uphold the finding of the learned CIT(A) on the issue in dispute. The ground of the appeal of the assessee is accordingly dismissed. - ITA No.923/Del/2017 (Assessment Year: 2012-13) - - - Dated:- 16-10-2019 - SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER Appellant by Shri Ashok Khandewal, CA Respondent by Shri K. Hauthang, Sr.DR ORDER PER O.P. KANT, AM: This appeal by the assessee is directed against order dated 10/01/2016 passed by the learned Commissioner of Income-tax (Appeals)-6, New Delhi [in short the learned CIT(A)] for assessment year 2012-13 raising following solitary ground: Action of the CIT(A) in sustaining a disallowance of ₹ 7,50,000/- made u/s 14A of Income Tax Act, 1961 is unjust, illegal, arbitrary and against the facts and circumstances of the case. 2. Briefly stated facts of the case are that the assessee filed return of income on 25/09/2012, declaring total income of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de, which has earned dividend income of ₹ 7,50,000/- to the assessee. In view of the arguments, the learned counsel submitted to restrict the disallowance under rule 8D(2)(iii) of the Rules. 4. The learned DR, on the other hand, relied on the order of the learned CIT(A). 5. We have heard the rival submission of the parties and perused the relevant material on record. The assessee made investment of ₹ 3 crore in unquoted fully paid up shares of Kochar Agro Industries Private Limited on 5.02.2011 and earned dividend income of ₹ 7,50,000/- from that investment during the year under consideration. The assessee did not make any suo motu disallowance for expenses incurred toward earning exempt income out of the expenses claimed, under section 14A of the Act . We find that the Assessing Officer invoking Rule 8D of the Income Tax Rules, 1962 made disallowance of ₹ 9,59,850/- towards earning the exempt income vide his order dated 02/05/2016 passed under section 154 of the Act as under: S. No. Disallowance Amount in Lakhs (Rs.) 1. The amount of expenditure di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e are funds available, both, interest free and overdraft and/or loans taken, then the presumption would arise that investment would be out of interest free funds generated or available with the company, provided said funds are sufficient to meet investment . After considering the submission of the assessee and verifying the details of working capital loan, the learned CIT(A) observed that investment in share was made out of overdraft account. The relevant finding of the learned CIT(A) is reproduced as under: In the instant case, investment in shares was made in February, 2011 i.e. in financial year 2010-11. On perusal of bank statement of appellant, it was found that there was Cash Credit Account to avail working capital loan bearing interest rate of 11 per cent per annum. The said account was Overdraft Account. The funds out flowed in February, 2011. The overdraft account balance before outflow of funds was ₹ 11.99 crores and after outflow, it was increased to ₹ 14.99 crores. Thus, it was clear that Cash Credit Overdraft Account bearing heavy interest burden was utilized towards making investment of ₹ 3 crore in equity shares. Apparently, there was direct n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d so as to mean that the entire tax exempt income is to be disallowed. The window for disallowance is indicated in section 14A, and is only to the extent of disallowing expenditure incurred by the assessee in relation to the tax exempt income . This proportion or portion of the tax exempt income surely cannot swallow the entire amount as has happened in this case. In Daga Global Chemicals Pvt. Ltd. v. ACIT (ITA No. 5592/Mum/2012) dt. 1-1-2015, it was held that disallowance under section 14A read with rule 8D of the Rules cannot exceed the exempt income. If any disallowance could be made, that is to be restricted to expenditure with respect to exempt income. In Ravian International (P) Ltd. v. ITO ITA No. 5735/Mum/2012 (Mum- Trib.) dt. 10-12-2014, it was held that where the assessee had not claimed any exempt income during the year under consideration, no disallowance could be made by invoking provisions of section 14A. In view of above judicial pronouncements, disallowance made under section 14A read with rule 8D is restricted to ₹ 7,50,000 only. Therefore, this ground of appeal may be treated as dismissed. 7. We find that the learned CIT(A) has give ..... X X X X Extracts X X X X X X X X Extracts X X X X
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