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TMI Blog2020 (6) TMI 609X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordingly, we restore this issue to the file of the AO for examining it afresh in the light of discussions made supra. Appeal of the assessee is treated as allowed for statistical purposes. - ITA No.300/Bang/2020 - - - Dated:- 24-6-2020 - Shri N.V. Vasudevan, Vice President And Shri B R Baskaran, Accountant Member For the Appellant : Shri C. Narayan, CA For the Respondent : Shri Muzaffar Hussain, CIT(DR)(ITAT), Bengaluru. ORDER PER N.V. VASUDEVAN, VICE PRESIDENT This is an appeal by the assessee against the order dated 24.01.2020 of the CIT(Appeals)10, Bengaluru relating to assessment year 2011-12. 2. The only issue that arises for consideration in this appeal is with regard to the correctness of the determ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee's own funds far exceeds the exempt income yielding assets, the presumption is that the assessee has earned exempt income from its own funds and hence no disallowance under section 14A is called for. 6. The learned CIT(A) has erred in law and on facts in holding that interest and other cost of ₹ 28,44,12,626 were incurred for purposes of earning exempt income. 7. Without prejudice to the above, the learned CIT(A) has erred in law and on facts, in not excluding the interest on term loans and other interest expenses on the borrowed fund utilized for specific purpose, for the purpose of determining disallowance under Section 14A of the Act, since such term loans/borrowed funds were obtained for specific purpose and wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l assets. Further, disallowance of a sum of ₹ 2,96,33,795 was made under Rule 8D(iii) on 0.5% of the average value of exempted investments (excluding investments in foreign subsidiaries. The CIT(Appeals) confirmed the order of the AO. 6. Before the Tribunal, it is submitted that during FY 2010-11, the Company has received exempt dividend income amounting to ₹ 57,04,390. The quantum of exempt income being ₹ 57,04,390 is evident from the Schedule El of the return of income and the detailed written submission dated 17.2.2014 was filed before the AO and CIT(A). It was submitted that for the purpose of calculating average value of investments under Rule 8D(2)(ii) (iii), only those investments which yielded dividend income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd investments made was filed before us which is at pages 38 to 42 of the assessee's paperbook and the same is enclosed as ANNEXURE-Ill to this order. It is clear from the said statement that the availability of profit, share capital and reserves surplus was much more than investments made by the assessee which could yield tax free income. 41. The Hon'ble Bombay High Court in Reliance Utilities Power Ltd. 313 ITR 340 (Bom) has held that where the interest free funds far exceed the value of investments, it should be considered that investments have been made out of interest free funds and no disallowance u/s. 14A towards any interest expenditure can be made. This view was again confirmed by the Hon'ble Bombay High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diture and its utilization for specific purposes, no interest disallowance is called for. In this regard, it is stated that it has paid interest on security deposits, cash credits/overdrafts, working capital demand loan, bill discounting facilities. When the disallowance is worked out under rule 8D(2)(ii), this contention of the assessee would lose its significance. (c) The Ld A.R submitted that, for the purpose of computing average value of investments, the AO should consider only those investments which have actually yielded exempt dividend income. We notice that this argument of the assessee finds support from the decision rendered by the Special bench in the case of Vireet Investments P Ltd (165 ITD 27)(Delhi- SB). Accordingly, we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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