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TMI Blog2020 (4) TMI 650X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) confirmed the disallowances. Aggrieved against the order of the Ld. CIT(A), the assessee filed this appeal. 3. The Ld. AR submitted that the Ld. CIT(A) erred in not appreciating that the assessee has sufficient own funds/internal accrual to cover the entire investments made and that no part of the borrowed funds were used by the assessee to make the investments. Since no part of the borrowed funds could be attributed for making the investments, no part of the interest expenditure could be disallowed by invoking section 14A r.w.r. 8D2(ii). In this regard, the Ld. AR relied on the order of this tribunal's decision in the assessee's own case for assessment year 2010-11 in ITA No. 2612/Mds/2014 & CO No. 137/Mds/2014 dated 19.08.2015 for assessment year 2010-11, wherein accepting the assessee's stand, the Ld. CIT(A) directed the AO to delete the interest disallowance u/s. 14A which was upheld by the ITAT. 4. We heard the rival submissions. The relevant portion of the order is as under: "6. Heard both sides. Perused orders of lower authorities. The issue in appeal has been elaborately considered by the Commissioner of Income Tax (Appeals) with reference to the submissions made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uted. In the present case, undisputedly the assesee's capital, profit and reserve, surplus and current account deposits were higher than the investment in the tax free securities. In view of this factual position, as per the judgement of this Court in the case of Reliance Utilities and Power Ltd.(supra), it would have to be presumed that investment made by the assessee would be out of interest free funds available with the assesee." Applying the above principles to the facts of the case, it is presumed that the appellant had made investments only out of the surplus funds available from the earlier years. Respectfully following the decision of the High Court of Bombay in the case of HDFC Bank Ltd. cited (supra), decision of the learned CIT(Appeals) in the appellant's own case for the A.Y. 2009-10, I am fully convinced that the AO has legally erred in making disallowance on the component of interest. Under the facts and circumstances of the case and legal position, I am of the considerate view 6 ITA No.2612/Mds/2014 & C.O. No.137/Mds/2014 that there can be no disallowance in so far as interest of borrowings is concerned u/s 14A. The AO, therefore, is directed to delete the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we direct the AO to compute disallowance u/s. 14A r.w.r. 8D(2)(iii) by considering only those investments which yielded exempt income during the year for the purpose of computing average value of investment and accordingly, recompute the disallowance u/s. 14A r.w.r. 8D(2)(iii). 7. With regard to the disallowance u/s. 40(a)(ia) in the case of Mr. John Lyons the AR submitted that the payment to Mr. John Lyons is made towards the fees for consultancy services rendered by him. This is covered by Article 14 - Independent Personal Services of the DTAA between India and Ireland, according to which, the income is taxable in India, only (i) the consultant has stayed for a period of 183 days or more in India and the income is attributable to the activities carried out by him in India, or (ii) the consultant has a fixed base in India and the income is attributable to that fixed base. Since the period of his stay in India during the FY is less than 183 days and he does not have a fixed base in India, the same is not taxable in India. Hence, no tax has been deducted on the same. In this regard, he invited our attention to the copy of the sample invoice and DAA are enclosed in the paper book. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to given documents related to stay of foreign agent in India such as passport and visa, but the assessee could not furnish them. In the circumstances, the Ld. CIT(A) confirmed the above disallowances made by the AO. Even before the Hon'ble ITAT, the assessee has not furnished any evidences with regard to the services rendered and the stay of foreign agents in India. In the circumstances, the Ld. DR pleaded that the assessee's plea may not be considered. 8. In the case of HSBC (Mauritius) Ltd, the Ld. AR submitted that the payment made to HSBC (Mauritius) Ltd is towards the interest on buyer's credit. This is covered by Article 11 - Interest of the DTAA between India and Mauritius, according to which, interest arising from a contracting state shall be exempt from tax in that state, if it is derived and beneficially owned by any bank carrying on a bonafide business which is a resident of the other contracting state. In the instant case, interest is paid to HSBC (Mauritius) Ltd, which is a bank carrying on a bonafide banking business in Mauritius and hence is exempt from tax in India as per the DTAA provisions. Hence no tax has been deducted on the same. In this regard, he invited o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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