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TMI Blog2022 (6) TMI 1240X X X X Extracts X X X X X X X X Extracts X X X X ..... cial precedents by the jurisdictional High Court, we are of the considered view that Ld. CIT(Appeals) has not erred in facts and in law in deleting the additions made by the Ld. Assessing Officer u/s 68 - Decided in favour of assessee. Disallowance u/s 14A r.w.r. 8D - sufficiency of own funds - HELD THAT:- As no infirmity in the order of the Ld. CIT(Appeals) when he held that if the assessee had sufficient funds for making investments in shares and interest free bonds and it had not used borrowed funds for such purpose, no disallowance can be made under section 14A of the Act and also that AO is required to take the average of investment from where non-taxable income has been earned in order to make disallowance under Rule 8D(2)(iii). In view of the above, we are of the considered view that Ld. CIT(Appeals) has not erred in facts and law in giving part relief to the assessee in respect of disallowance made by the Ld. Assessing Officer under section 14A of the Act. - Decided against revenue. - ITA No. 772/Ahd/2019 - - - Dated:- 24-6-2022 - Shri Waseem Ahmed, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member For the Assessee : Shri P.D. Shah, A.R. For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, actual income need not be earned. Accordingly, the AO disallowed a sum of ₹ 35,17,822/- u/s 14A of the Act. Secondly, the AO also noted that during the year the assessee has received a sum of ₹ 5,29,28,587/- from Sandesh Procon LLP. However, despite several opportunities, the assessee did not furnish the confirmation, identity, creditworthiness and genuineness of the credit appearing the balance sheet in the name of Sandesh Procon LLP. The AO held that the assessee has no evidence to prove the credit appearing in the balance sheet. Accordingly, the AO treated the sum of ₹ 5,29,28,587/- as unexplained credit under section 68 of the Act. 4. The assessee filed appeal against the above assessment order. In respect to the disallowance of ₹ 5,29,28,587/- as unexplained cash credit under section 68 of the Act, the assessee filed formal confirmation from Sandesh Procon LLP along with other supporting documents to establish identity, creditworthiness and genuineness of the loan. The assessee accordingly submitted confirmation from the creditor, bank statement, audited balance sheet of Sandesh Procon LP and the loan agreement with Sandesh Procon LLP in support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowances of Rs.35,17,822/- as per Rule 8D u/s. 14A as appellant has not allocated any expenditure towards the exempt income. The appellant has contended that the AO while making disallowances under Rule 8D has computed the disallowance of interest as per Rule 8D(2)(ii) of Rs.18,23,172/- and administrative expenses as per Rule 8D(2)(iii) of Rs.16,94,650/-. Appellant has submitted that company has sufficient interest free funds in the form of share capital of Rs.2.78 crore and reserve and surplus of Rs.27.69 crore and FCCD of Rs. 12.19 crore to make the investment of Rs.4.86 crore from which dividend income has been earned. Therefore, in view of decision of jurisdictional High Court in the case of CIT Vs. Torrent Power (supra), disallowance of interest is uncalled for. Appellant also has submitted that during the year there is a interest income of Rs.2,61,42,321/- as against interest expenses of Rs.23,62,310/-, and therefore, there is a net interest income and according to decision of jurisdictional High Court in the case of Pr. CIT- 3 Vs. Nirma Credit and Capital Pvt. Ltd.-(supra), disallowance of interest under Rule 8D(2)(ii) is uncalled for. I agree with the submission made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als) has after appreciation of evidence placed on record by the assessee during the course of appeal proceedings has deleted the additions. During appeal, the assessee was able to produce the confirmation from the creditors in support of genuineness of the transaction, loan agreement with M/s Sandesh Procon LLP, bank statement and audited balance sheet of M/s Sandesh Procon LLP evidencing the above transaction were also placed on record to prove the genuineness of transaction. Further, the fact that the loan was repaid back with interest, on which TDS was duly deducted also lends support to the genuineness of transaction. In the case of Shree Samruddhi OverseasTrading Co. v. DCIT in ITA Number I.T.A. Nos. 909 910/Ahd/2018 , the Ahmedabad ITAT held that repayment of loan points towards genuineness of transaction in the following words: The repayment of loan exists as a strong mitigating circumstance and transcends all considerations. We thus find that the documents placed by the assessee before the Revenue authorities sufficiently discharge the onus towards the identity and genuineness of the transaction and creditworthiness of the lender contemplated under s.68 of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest paid by the assessee on borrowings minus taxable interest earned during the year. Further, as regards disallowance of administrative expenditure of ₹ 16,94,650/- under Rule 8D(2)(iii) is concerned, Hon ble Delhi High Court in ACB India Ltd. vs. CIT (2015) 374 ITR 108 (Del) has held that the average value of investments, for the purposes of Rule 8D(2)(iii), should be confined to those securities in respect of which exempt income is earned and not the total investments. Similar view has been taken by the Special Bench of the Tribunal in the case of ACIT vs. Vireet Investments (P) Ltd. (2017) 165 ITD 27 (Del) (SB) and also the case of Poonawalla Finance Pvt. Ltd. Vs DCIT (ITAT Pune) ITA No. 1589/PUN/2019 . Accordingly, we find no infirmity in the order of the Ld. CIT(Appeals) when he held that if the assessee had sufficient funds for making investments in shares and interest free bonds and it had not used borrowed funds for such purpose, no disallowance can be made under section 14A of the Act and also that AO is required to take the average of investment from where non-taxable income has been earned in order to make disallowance under Rule 8D(2)(iii). In view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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