2016 (3) TMI 1101

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....ing C.O. No. 88/KOL/2013. 2. The solitary issue involved in the appeal of the Revenue relates to the deletion by the ld. CIT(Appeals) of the addition of Rs. 57.68 lakhs made by the Assessing Officer under section 14A of the Act read with Rule 8D of the Income Tax Rules. 3. The assessee in the present case is a Non-Banking Finance Company. The return of income for the year under consideration was filed by it on 19.09.2009 declaring total income of Rs. 28,11,100/-. In the said return, dividend income of Rs. 13,28,290/- was claimed to be exempt by the assessee and a disallowance of Rs. 5.76 lakhs was offered on account of expenditure incurred in relation to the earning of the said exempt income as required by the provisions of section 14....

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....ores mainly consisting of Rs. 17.87 crores in the mutual funds. No disallowance out of interest was made upto A.Y. 2008-09 which shows that till that year it is accepted that the investment have come out of share capital and reserves. The share capital, reserve and surplus of the assessee were Rs. 18.97 crores which was more than the amount of investment in mutual funds and securities. The A.O. has not brought on record any facts to suggest that loan funds were used for investment in shares and securities. There was no finding that any expenditure was directly related to the earning of the exempted income. Therefore the provision or Rule 8D(2)(i) were not applicable. It is also not the case of the A.O. that mixed funds were used for investm....

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....ing Officer in support of the revenue's case on the issue under consideration, while the ld. Counsel for the assessee strongly supported the impugned order of the ld. CIT(Appeals) and also relied on the decision of the Coordinate Bench of this Tribunal in the case of REI Agro Limited -vs.- DCIT reported in 144 ITD 141, which is affirmed by the Hon'ble Calcutta High Court in ITAT No. 161 of 2013 dated 23.12.2013. 6. We have considered the rival submissions and also perused the relevant material available on record. It is observed that in the computation of total income, disallowance of Rs. 5.76 lakhs was offered by the assessee under section 14A of the Act on account of expenditure incurred in relation to the earning of exempt dividend in....