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TMI Blog2021 (8) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... for short] which has been confirmed by Ld. CIT(A). All the appeals were heard together and are being disposed of by this common order for the sake of convenience. 2. The facts relating to the issue are stated in brief. The assessee is engaged in the business of real estate development. It has formed subsidiary companies and partnership firms to execute various projects. Accordingly, the assessee has made investments in the above said concerns. In all the four years under consideration, the assessee has received "share income from partnership firm" as detailed below:- For A.Y. 2013-14 - 12.34 crores For A.Y. 2014-15 - 12.95 crores For A.Y. 2015-16 - 12.22 crores For A.Y. 2016-17 - 10.82 crores (Note:-- The above said figures h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t free advances given by the assessee. Accordingly, the Ld. A.R. submitted that no disallowance out of interest expenditure is called for, since the presumption is that the interest free funds/own funds have been used to make investments. The Ld. A.R. also submitted that the assessee had taken loan in the earlier years for specific purposes and not during the year under consideration. 5. The Ld. A.R. also contended that the A.O. has not recorded satisfaction to reject the claim of the assessee with regard to the disallowance u/s 14A of the Act and hence, the A.O. could not have invoked provisions of Rule 8D for making disallowance. 6. The Ld. A.R. also submitted that the A.O. has considered value of all investments for working out average ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )(1 SCC 674) wherein it was observed as under:- "10. The AO has to satisfy whether the penalty proceedings be initiated or not during the course of the assessment proceedings and the AO is not required to record his satisfaction in a particular manner or reduce it into writing." Even though, the above said observation was made in the context of penalty levied u/s 271(1)(c) of the Act, yet the said ratio, in our view, could equally be applied to sec.14A of the Act in the matter of recording of "satisfaction/dissatisfaction". In the instant cases, we have earlier noticed that the A.O. has made detailed discussion in all the years under consideration on the applicability of sec.14A of the Act, that too, after considering the letter filed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es given to other sister concerns in the above statement. A perusal of the above statement would show that the own funds and interest free funds available with the assessee are in excess of the value of investments in subsidiaries/related concerns and interest free advances given by the assessee. Hence, as per the decision rendered by Hon'ble High Court of Karnataka in the case of CIT Vs. Micro Labs Ltd. (Income Tax Appeal No.471/2015 dated 11.3.2016), no disallowance out of interest expenditure is called for under Rule 8D(2)(ii). For the sake of convenience, we extract below the operative portion of the order passed by Hon'ble Karnataka High Court: "40. We have heard the rival submissions. A copy of the availability of funds and investme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxmann.com 335 . When the issue is already covered by a decision of the High Court of Bombay with which we concur, we do not find any substantial question of law would arise for consideration as canvassed." Accordingly, applying the ratio laid down by Hon'ble Karnataka High Court in the case of Micro Labs Ltd. (supra), we hold that no disallowance out of interest expenditure is called for under rule 8D(2)(ii). Accordingly, we set aside the order passed by Ld. CIT(A) on this issue in assessment years 2013-14 & 2014-15 and direct the A.O. to delete the disallowance. 10. With regard to the disallowance made out of "other expenses" under Rule 8D(2)(iii), it is the case of the assessee that it has received exempt income only from one/two pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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