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TMI Blog2024 (7) TMI 1376X X X X Extracts X X X X X X X X Extracts X X X X ..... d had been wrongly included as interest while making disallowance u/s 14A of the Act. We therefore, respectfully following the judgement of Godrej Boyce Mfg. Company Ltd [ 2017 (5) TMI 403 - SUPREME COURT ] hereby delete the impugned disallowance made u/s 14A of the Act in respect of interest expenditure. Thus, grounds of the assessee s appeal are allowed. - Shri G.S.Pannu, Vice President And Shri Kul Bharat, Judicial Member For the Appellant : Shri Baldev Raj, CA For the Respondent : Ms. Alka Gautam, Sr.DR Shri Kanv Bali, Sr. DR ORDER PER KUL BHARAT, JM : The present appeal filed by the assessee for the assessment year 2013- 14 is directed against the order of Ld. CIT(A)-I, New Delhi dated 09.06.2017. The assessee has raised following gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y invoking the provision of section 14A of the Income Tax Act, 1961 ( the Act ). 3. Ground Nos.5 6 are general in nature, need no separate adjudication. 4. Facts giving rise to the present appeal are that the assessee company filed its return of income at Rs. 7,86,28,030/- on 30.11.2013. The case was selected for scrutiny assessment and the assessment u/s 143(3) of the Act was framed vide order dated 15.03.2016. The Assessing Officer while framing the assessment, noticed that the assessee made investment in a partnership firm. The income derived therefrom was not includible in the taxable income of the assessee. Therefore, the Assessing Officer issued show-cause notice vide note sheet entry dated 28.01.2016 as to why provisions of section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee filed the present appeal. 7. The Ld. Counsel for the assessee reiterated the submissions as made before Ld.CIT(A). It was contended by Ld. Counsel for the assessee that the Assessing Officer has erred in attributing proportionate interest on borrowings from Bank, to the investment in the capital of a partnership firm, M/s. Advance Valves Global, of which it was a 51% partner and earned its share of profit which is exempt in its hands u/s 10(2A) of the Act. A note in respect of computation of disallowance was also submitted before Ld. CIT(A). He took us through the Paper Book to buttress the contentions that Ld.CIT(A) has not considered the submissions made by the assessee. 8. On the contrary, Ld. Sr. DR opposed these submissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d derivable income from such partnership is not includible in taxable income. The appellant has invested Rs. 11,91,56,644/- in the partnership firm during the year, therefore, the Assessing Officer has applied the provisions of Section 14A read with Rule 8D for working out disallowance under Rule 8D(2)(ii) and Rule 8D(2)(iii). The appellant has contended that investment made in the partnership firm as on 31.03.2012 of Rs. 7,17,32,532/- and as on 31.03.2013 of Rs. 11,91,56,644/- is out of the share capital and reserve and surplus and no interest bearing funds has been utilized by it. It is contended by the appellant that it has got share capital, reserve and surplus to the extent of Rs. 40,11,56,900/- out of which it has invested in fixed as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, for working out disallowance under Rule 8D(2)(ii), the interest including bank charges and bank guarantee charges paid by the appellant has to be taken into consideration. Therefore, the Assessing Officer has rightly worked out the disallowance of interest of Rs. 9,06,947/- and Rs. 4,77,223/- being .5% of the average investments. Hence, the disallowance made by the AO is upheld and this ground of appeal of the appellant is rejected. 11. From the above, it is clear that Ld.CIT(A) has not contradicted the submission of the assessee that it had sufficient interest free funds. The Hon ble Supreme Court in the case of Godrej Boyce Mfg. Company Ltd. (supra), held as under:- 38. In the present case, we do not find any mention of the reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. 12. In the present case, Ld.CIT(A) as well the assessing authority has not brought any material suggesting that the interest free funds were diverted for earning of tax free income. Under these facts, the disallowance made in respect of interest expenditure is not justified. Moreover, the Assessing Officer and Ld. CIT(A) did not advert to the submissions of the assessee that bank charges and bank guarantee charges do not partake character of interest and had been wro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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