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TMI Blog2019 (12) TMI 1417X X X X Extracts X X X X X X X X Extracts X X X X ..... ital and free reserves were substantially more than the cost of share investment, yielding dividend income, no part of the interest paid is disallowable because borrowed funds were not used for acquiring shares. For that we rely on the judgment in the case of CIT vs HDFC Bank Ltd.[ 2016 (3) TMI 755 - BOMBAY HIGH COURT] Therefore, the disallowance under Rule 8D(2)(ii) read with Section 14A is not attracted in assessee s case hence we direct the Assessing Officer to delete the disallowance under Rule 8D(2)(ii) of the IT Rules. Appeal of the assessee is allowed. - ITA No.515/Kol/2019 - - - Dated:- 31-12-2019 - SHRI S.S.GODARA, JM AND DR. A.L.SAINI, AM For the Appellant : Shri D.S. Damle, FCA For the Respondent : Smt. Ranu Bi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unds already taken either at the time of hearing of the appeal or before. 3. Brief facts qua the issue are that the assessee company filed its return of income on 29.09.2013 declaring total loss to the tune of ₹ 663,99,40,209/-. During the financial year, the assessee company engaged in the business of manufacturing and selling of Glass Bottles containers, printing of bottles, manufacturing of casting and power generation. The assessee s case was selected for scrutiny u/s 143(2) of the Act and the Assessing Officer computed the addition u/s 143(3) of the Act by making disallowance u/s 14A read with Rule 8D as follows: 3. Aggrieved by the addition made by the Assessing Officer the assessee carried the matter in appeal befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. As regards to disallowance under rule 8D (iii), the AR of the appellate has submitted that the disallowance under Section 14A in terms of formula laid down in Rule 8D should be computed with reference to the dividend yielding investments. As regards to disallowance of the Interest under rule 8D(ii) the AR of the appellate before the AO as well as me had stated that the secured loans were obtained by the appellant for specified business purposes. 1 find that the interest expenses pertain to interest paid to banks financial institutions for obtaining term loans, cash credit facilities, working capital limits, packing other related export credits etc. The all these loans were secured against the fixed assets and working capital comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he above decisions the coordinate Benches referred to the decision of Kolkata Bench of ITAT in the case of ACIT Vs Champion Commercial Limited (139 ITD 108) wherein it was observed that Section 14A of the Income-tax Act, 1961 recognizes two categories of income which are mutually exclusive viz. 'tax exempt income' and 'taxable income'. Accordingly, while allocating interest amongst these two categories, interest which is directly relatable to 'taxable income' is to be excluded from the purview of the disallowance interest which is directly relatable to exempt income' has to be entirely disallowed under Section 14A. It is only the remaining common interest which does not relate to any specific category of incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the appellant shall furnish before the AO the details in the matter. The AO is also directed to verify the same and accordingly re-compute the disallowance u/s 14A r.w. Rule 8D. The AO shall allow the appellant an opportunity of hearing before passing any order in this regard. This ground is therefore allowed for statistical purposes. 4. Aggrieved by the order of the ld. CIT(A), the assessee is in appeal before us. 5. The ld. Counsel for the assessee relied on the submissions made before the authorities below on the other hand, the ld. DR has primarily reiterated the stand taken by the Assessing Officer which we have already noted in our earlier para and the same is not being repeated for the sake of brevity. 6. We heard both t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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