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TMI Blog2014 (9) TMI 1266X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. CIT(A) -has erred in confirming the computation of disallowance of Rs. 1,11,549/-(48346/-+63203/-)made by A.O. u/s 14A r.w.rule 8D of Income Tax Rules. 2. That the ld. CIT(A) has erred in confirming the disallowance of Rs.64,690/- made by the A.O. after giving credit of Rs.46,859/- already disallowed by the appellant. 3. That the aforesaid disallowance is against the law and facts of the case. 4. That the ld. CIT(A) has erred in disallowing an interest of Rs.39,262/- on debit balance in the account of one of the partner ignoring the facts that there was huge credit in the accounts of other partners on which no interest was being paid. 3. The ground of appeal Nos. 1 to 3 relate to the disallowance made under section 14A of the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was Rs. 64,690/-. The said disallowance made by the Assessing Officer was upheld by the Commissioner of Income Tax (Appeals) against which the assessee is in appeal. 5. The ld. AR for the assessee pointed out that no new investment had been made during the year and all the old investments were made out of own funds and no borrowed funds were utilized for making the said investments. Further, it was pointed out that the assessee had a total capital of about 30 crores and the total investment during the year in assets on which income was exempt were about Rs. 1 crore. It was further pointed out by the ld. AR for the assessee that the assessee had himself disallowed a sum of Rs. 46,859/- as computed at page 3 of the Paper Book. Further, it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance was made in the earlier year. In respect of the balance expenditure i.e. 0.5% of the value of the investment, the disallowance had already been made by the assessee. Another aspect of the issue raised by the ld. AR for the assessee was that the Assessing Officer had worked out the disallowance on interest under section 8D(2)(ii) on gross interest expenditure whereas net interest expenditure had to be considered. 8. On the perusal of record, we find that during the year under consideration, the assessee had received dividend of Rs. 2,29,37,500/- which was exempt in the hands of the assessee. The assessee claimed in the computation of income filed for the year under consideration, the expenditure by way of interest incurred on i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce made by the assessee sue-motto, we are of the view that the provisions of Rule 8D are applicable to the year under consideration i.e. assessment year 2008-09. The reliance by the ld. AR for the assessee on various case laws in this regard are misplaced. The majority of the said case laws relate to the assessment years prior to assessment year 2008-09 i.e. the year from which the provisions of Rule 8D are applicable. Further, the assessee himself has worked out disallowance both under Rule 8D(2)(ii) and 8D(2)(iii) of the IT Rules and in view of the abovesaid facts, we find no merit in the reliance placed upon by the ld. AR for the assessee on the various case laws and the same are not being referred to. 10. Now comes the question of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the huge credit balance of the partners which remained positive through out the year and even at the end of the year, there was no merit in any disallowance under section 36(1)(iii) of the Act. 12. The ld. DR for the revenue, on the other hand, placed reliance on the order of the Commissioner of Income Tax (Appeals). 13. We have heard the rival contentions and perused the record. The issue raised before us was in relation to disallowance of interest being attributable to the negative balance of the partner, where cumulative balance of the other partners alongwith the partner having debit balance were to be considered in order to compute the disallowance under section 36(1)(iii) of the Act. We find that similar issue arose before Chandi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the partner was less than the combined credit balances of the other two partners i.e. the cumulated capital account of all the partners was credit balance. The Tribunal in view of the same in-turn following the ratio laid down by the Chandigarh Bench of Tribunal in the case of M/s Ansysco in ITA No. No. 883/Chd/2008 vide order dated 17.09.2009 applied the ratio and held that since the combined balance outstanding in the partners' capital account was in credit, it could not be said to be a case of diversion of funds for non-business purposes. 8. Now coming to the facts of the present case, the cumulative capital balance of the partner is negative figure. Consequently, the precedent relied upon by the ld. AR for the assessee is not appl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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