TaxTMI 
TaxTMI 
TaxTMI 
2015 (11) TMI 392
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....of the Income-tax Rules, 1962 (hereinafter referred to as "the Rules") in its entirety, the Revenue has preferred the present Tax Appeal No. 276 of 2015 with the following proposed question of law : "Whether, on facts and in the circumstances of the case, the Appel late Tribunal is right in deleting the disallowance made on account of interest expenditure under section 14A read with rule 8D though the assessee suo motu disallowed the amount on ad hoc basis ?" 2.1 Feeling aggrieved and dissatisfied with the impugned judgment and order dated October 10, 2014, passed by the learned Income-tax Appellate Tribunal, "B" Bench, Ahmedabad (hereinafter referred to as "the Tribunal") in I. T. A. No. 781/Ahd/2013 for the assessment year 2009-10 by which the learned Tribunal has dismissed the said appeal preferred by the Revenue confirming the deletion of disallowance of interest expenses under section 14A of the Act read with rule 8D of the Rules made by the learned Commissioner of Income-tax (Appeals) and deleting the disallow ance made by the Assessing Officer under section 40(a)(ia) of the Act for non-deduction of TDS on overseas freight, the Revenue has preferred the present Tax Appeal N....
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....o motu dis allowed Rs. 2,00,000 in its computation of income, the effective disallow ance was restricted to Rs. 12,06,934. 3.3 The Assessing Officer also disallowed an amount of Rs. 1,02,43,720 under section 40(a)(ia) of the Act for non-deduction of the TDS on over seas freight. 3.4 Feeling aggrieved and dissatisfied with the order of assessment passed by the Assessing Officer of disallowance of the interest expenses under section 14A of the Act read with rule 8D of the Rules and also the disallowance made by the Assessing Officer under section 40(a)(ia) of the Act for non-production of the TDS on overseas freight, the assessee pre ferred an appeal before the learned Commissioner of Income-tax (Appeals). That the learned Commissioner of Income-tax (Appeals) partly allowed the said appeal and deleted the disallowance of Rs. 5,84,706 out of the disallowance of Rs. 12,06,934 made by the Assessing Officer under section 14A of the Act of the amount of disallowance of interest and administrative expenses. Meaning thereby the learned Commissioner of Income-tax (Appeals) confirmed the disallowance of administration and calculation charges of Rs. 6,22,228 under section 14A of the Act. The....
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....ated the fact that the dispute with respect to the assessment year 2009-10 and, therefore, rule 8D of the Rules which had come into force with effect from March 2008, would be applicable. It is submitted that it is neither the learned Commissioner of Income-tax (Appeals) nor the learned Tribunal which disputed that there were mix kind of expenses and, therefore, in that view of the matter rule 8D would be applicable and, therefore, the entire expenditure was required to be disallowed under section 14A of the Act. Mrs. Bhatt, learned counsel appearing on behalf of the Revenue, has heavily relied upon the decision of the Bombay High Court in the case of Godrej and Boyce Mfg. Co. Ltd. v. Deputy CIT reported in [2010] 328 ITR 81 (Bom) in support of her submission that rule 8D could be applicable from the assessment year 2008-09 and the expenditures are mix kind of expenditures. Mrs. Bhatt, learned counsel appearing on behalf of the Revenue, has further submitted that even the learned Tribunal has materially erred in confirming the order passed by the learned Commissioner of Income-tax (Appeals) deleting the disallowance made by the Assessing Officer under section 40(a)(ia) of the Act. ....
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....ure according to section 14A read with rule 8D of the Act. He, therefore, computed the proportionate disallowance of interest expenditure at Rs. 5,84,706 and disallowed the same. Before the Commissioner of Income-tax (Appeals), the assessee submitted that the assessee had borrowed funds for the purposes of vehicle and old loan of Rs. 2,005 for captive power plant, and, therefore, no borrowed funds were used for non-business purposes. Further, the assessee relied upon the decision of the hon'ble Supreme Court in the case of S. A. Builders Ltd. [2007] 288 ITR 1 (SC) and Munjal Sales Corpo ration v. CIT [2008] 298 ITR 298 (SC) and the decision of the hon'ble Mumbai High Court in the case of CIT v. Reliance Utilities and Power Ltd. [2009] 313 ITR 340 (Bom) where it was held that if the interest-free funds of the assessee were sufficient for making invest ments, no disallowance of interest expenditure was called for. The Commissioner of Income-tax (Appeals) held that the finding of the Assessing Officer was not correct that the assessee has not charged any interest-free loan to associate concerns. He held that the assessee in fact earned interest income at the rate varying from ....
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....of Rs. 6,22,228. Thus, ground No. 1 of appeal of the assessee is allowed." We are in complete agreement with the view taken by the learned Tribunal and the reasons given by the learned Tribunal while deleting the disallowance of interest expenses under section 14A of the Act. 5.2 Now, so far as the contention on behalf of the appellant with respect to the applicability of rule 8D of the Rules with effect from March 31, 2006, is concerned, there cannot be any dispute about the same. How ever, it is required to be noted that the Assessing Officer made the dis allowance under section 14A of the Act solely on the ground that the assessee failed to justify that the investment was made out of the interest- free funds. However, both the learned Commissioner of Income-tax (Appeals) as well as the learned Tribunal have found otherwise. Under the circumstances, the decision of the Bombay High Court in the case of Godrej and Boyce Mfg. Co. Ltd. (supra) which has been relied upon by the learned counsel appearing on behalf of the Revenue would not be of any assistance to the facts of the case on hand. Therefore, we confirm the impugned judgment and order passed by the learned Tribunal in so ....