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TMI Blog2020 (2) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... any error in the impugned order of the ld. CIT(A) to the extent of sufficiency of the assessee s own funds for making investment in the mutual funds. Disallowance sustained by the ld. CIT(A) towards the administrative expenses as per Rule 8D(2)(iii) of the Rules - CIT(A) has restricted the said disallowance to the amount of dividend income - identical issue has been considered by this Tribunal in assessee s own case [ 2019 (4) TMI 192 - ITAT JAIPUR] - CIT(A) has also followed the order of the Tribunal while restricting the disallowance U/s 14A read with Rule 8D(2)(iii) of the Rules and hence we do not find any error or illegality in the impugned order of the ld. CIT(A) qua this issue. Disallowance made u/s 36(1)(iii) of the Act on account of interest expenditure in respect of OD account - HELD THAT:- CIT(A) has considered the fund flow position of the assessee and thereby come to the conclusion that the total interest expenses on OD account was ₹ 49,197/-. In view of the above facts and circumstances of the case when the A.O. has not given any finding in the remand report, we do not find any error or illegality in the impugned order of the ld. CIT(A) qua this issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting entire such addition, made by ld. AO, sustained by the ld. CIT(A). 3. The appellant company craves its right to add, amend or alter any of the grounds on or before the hearing. 2. Whether on the facts and circumstances of the case and in law, the ld CIT(A) was justified in restricting the disallowance from ₹ 4,52,338/- to ₹ 49,197/- made by A.O. u/s 36(1)(iii)? 3. In the cross appeals, the revenue as well as the assessee has raised common issues as part relief was granted by the ld. CIT(A). Ground No. 1 of the revenue s appeal and ground No. 2 of the assessee s appeal are regarding disallowance made by the A.O. U/s 14A of the Act of ₹ 2,76,51,752/- was restricted to ₹ 16,51,186/-. The revenue is aggrieved against the relief of about 2.60 crores granted by the ld. CIT(A) whereas the assessee has challenged the disallowance sustained to the extent of ₹ 16,51,186/-. The ld AR of the assessee has submitted that the assessee produced all relevant material and details before the A.O. as well as the ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee has used its Over Draft Account (OD Account) for making investment in mutual funds, therefore, the funds from the OD account clearly borrowed funds used by the assessee. Subsequently the assessee has transferred the funds in the OD account and source of which was not explained properly. He has relied upon the order of the A.O. 5. We have considered the rival submissions as well as relevant material on record. Though, the A.O. has stated in the assessment order that the assessee has invested ₹ 290.14 crores in purchasing of mutual funds, however, as per the balance sheet as on 31/03/2008 as well as on 31/03/2009 we find that the investment in mutual funds is shown at ₹ 60.20 crores and ₹ 11.94 crores respectively. Therefore, the closing balance of investment as on 31/3/2008 was as ₹ 60.20 crores which was reduced to ₹ 11.94 crores as on 31/3/2009. These details as stated in the balance sheet are not disputed by the revenue, thus it is clear that during the year under consideration, there is no increase in the investment in mutual funds but there is a substantial decrease in the investment in mutual funds. The A.O. in the rema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses incurred by the assessee, which facilitated in earning the dividend cannot be ruled out. In this connection, reliance is placed on the decision of Hon'ble ITAT, Mumbai in the case of M/s Gherzi Eastern Limited (ITA No. 6562/Bom/94 dated 23rd September 2002) wherein the Hon'ble Tribunal has made the following remarks: Having heard both the parties we are of the opinion that it cannot be denied that some administrative expenditure was definitely attributed towards earning of this dividend income and that had to be deducted While allowing deduction under section 80M. Hence, I do not find any merit in the avern4nt made by the assessee in additional evidence produced before the Ld. CIT(A) as well as before this office and accordingly, the addition made by the AO is correct. Despite the matter was remanded by the Tribunal to the record of the ld. CIT(A) for confronting the additional evidence filed by the assessee to the A.O.. The A.O. in the remand report has not given any finding on the facts and the evidence produced by the assessee but simply stated that I do not find anything contrary to the order of the A.O. Such remand report would not ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mand report of the A.O., restricted the disallowance to ₹ 49,197/- on the ground that the interest expenditure on the over draft facility is only ₹ 49,197/- and therefore, the disallowance cannot be more than the actual expenditure incurred on account of interest on the OD account. 9. We have heard the ld DR as well as the ld AR and considered the relevant material on record. The ld AR of the assessee has submitted that when the assessee was having its own sufficient funds for making investment in the mutual funds then the interest expenditure incurred in respect of over draft facility availed from the bank cannot be attributed to the investment made in the mutual funds. He has repeated its contention as raised in respect of disallowance of interest U/s 14A of the Act. He has also relied upon the decision of the Hon ble Supreme Court in the case of CIT Vs. Reliance Industries Limited 410 ITR 466. The ld DR has relied upon the order of the A.O. and remand report. 10. We have considered the rival submissions as well as relevant material on record. In the set aside proceedings, the ld. CIT(A) has called a remand repot from the A.O. After examination of the record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent in mutual funds has resulted in debit balance in overdraft account. Therefore, it is held that the debit balance of ₹ 45,23,383/- has occurred due to investment in mutual funds. The AO has calculated the interest by applying flat rate of 10% on the outstanding balance without considering the duration of the debit balance. The appellant has provided detailed working of such debit balances existing in overdraft account which was also reproduced by the Ld. CIT(A) in its appellate order in first round of appeal. As per the above working, total interest expenses on such overdraft accounts was ₹ 49,197/-. Considering the overall fund flow position submitted by the appellant, the maximum disallowance on account of diversion of funds towards investment in mutual funds can be to the extent of interest paid on debit balances in the account through which investment in mutual funds was made. Considering this, the disallowance made by the AO is restricted to ₹ 49,197/-. Thus, it is clear that the ld. CIT(A) has considered the fund flow position of the assessee and thereby come to the conclusion that the total interest expenses on OD account was ₹ 49,197 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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