TaxTMI 
TaxTMI 
2016 (8) TMI 404
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....s of manufacturing of soap, stone powder, agricultural produce and trading in consumer goods. Assessee electronically filed its return of income for AY 2007-08 on 31/10/2007 declaring loss of Rs. 2,23,17,606/-. The case was selected for scrutiny and thereafter the assessment was framed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") vide order dated 31/03/2009 and the total loss was determined at Rs. 2,18,37,940/-. Aggrieved by the order of AO, assessee carried the matter before the ld.CIT(A), who vide order dated 20/03/2012, granted partial relief to the assessee. Aggrieved by the order of ld.CIT(A), assessee is now in appeal before us and has raised following grounds;- 1) In law and in facts and circumstances of the Appellant's case, the learned CIT(A) has grossly erred in the points of law and facts. 2) In law and in facts and circumstances of the Appellant's case, the learned CIT(A) has grossly erred in dismissing appellant's ground regarding allowing of interest expenses Rs. 8,25,42,400 paid during the year but provided in earlier Asst.Years. In earlier Asst.Years the said interest expense was disallowed in assessment order passed u/s.143(3) of....
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....rial available on record and gone through the orders of the authorities below. The issue in the present appeal is with reference to allowance of interest expenses. It is assessee's submission that assessee had issued OFCPN in earlier years and had debited the interest payable on those OFCPNs as expenses but the claim of expenses was negated by AO for the reason that the claim of expenses was contingent in nature as no amount was paid in those respective years. Against the order of AO, matter was carried in appellate proceedings and as on date the status of appeals, as reproduced by ld.CIT(A) in his order is as under:- Acct.Year Asst.Year Amount of Interest Expenses (Rs.) As per the assessment order As per the CIT(A)'s order Allowed as per ITAT's order 2002-03 2003-04 1,88,16,534 Disallowed Dismissed Set Aside to Hon'ble CIT(A) 2003-04 2004-05 1,99,80,501 Disallowed Dismissed Allowed 2004-05 2005-06 2,12,16,470 Disallowed Dismissed Allowed 2005-06 2006-07 2,25,28,895 Disallowed Allowed Department Appeal Pending 4.1. During the year, assessee had claimed before ld.CIT(A) the expenses be allowed on payment basis, but the claim of dedu....
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....nd circumstances of the Appellant's case, the learned CIT(A) has grossly erred in dismissing appellant's ground regarding charging of interest u/s.234B of I.T.Act for Rs. 26,055. 4) In law and in facts and circumstances of the Appellant's case, the learned CIT(A) has grossly erred in dismissing appellant's ground regarding charging of interest u/s.234D of I.T.Act for Rs. 54,207. 5) In law and in facts and circumstances of the Appellant's case, the learned CIT(A) has grossly erred in dismissing appellant's ground regarding withdrawing of interest u/s.244A of I.T.Act for Rs. 2,12,330. 6.2. On the other hand, Revenue has raised the following ground in ITA No.1211/Ahd/2012:- 1. The Ld.Commissioner of Income tax (A) has erred in law and on facts in directing the Assessing Officer not to make adjustment of disallowance of Rs. 42,97,474/- u/s.14A of the Act, while computing MAT profit u/s.115JB of the Act. 6.3. We take up the assessee's appeal in ITA No.913/Ahd/2012. 6.4. Before us, ld.AR, at the outset, submitted that though assessee has raised various grounds but the effective ground is Ground No.2 with respect of disallowance of u/s.14A of the Act and the other grounds are co....
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....kes it very clear that provisions of section 14A r.w. rule 8D will be applicable even in the case where appellant claims that no expenditure has been incurred in investment of equities, income from which is exempt as per provisions of IT. Act. I have perused various case laws relied upon by the Id.A.R. These case laws pertains to the period when provisions of section 14A(2), 14A(3) and rule 8D were not applicable. The reliance placed by the appellant on Hon'ble ClT(A)'s order for earlier A.Yrs. will also not help the appellant, since, these cases were decided keeping in view the provisions of law as it was existing before A.Y. 2008-09 when provisions of section 14A(3) r.w. rule 8D was not applicable. In view of the above, I am of the considered view that the A.O. had rightly applied provisions of rule 8D and I entirely agree with the disallowance made by the A.O. u/s.14A of I.T.Act. In view of above, disallowance of Rs. 42,97,474/- made by the A.O. u/s.14A is confirmed." 6.6. Aggrieved by the order of the ld.CIT(A), assessee is now in appeal before us. 6.7. Before us, ld.AR reiterated the submissions made before the AO and ld.CIT(A) and further submitted that in assessee....
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....arned exempt income in the form of dividend of Rs. 23,93,472/-. It is also undisputed fact that for the year under consideration provisions of Section 14A r.w. Rule 8D of I.T.Rules are applicable. Before us, it is assessee's submission that assessee has enough funds in the form of Share Capital and Reserves and Surplus and therefore no disallowance u/s.14A of the Act is called for. On perusing the copy of the Balance Sheet as at 31/03/2008 which is placed at page No.11 of the paper-book, it seen that the total interest-free funds as at 31/3/2008 comprising of Share Capital and Reserves and Surplus is Rs. 25,39,21,834/- as against Investment of Rs. 15,84,13,764/-. Further the investments have reduced from Rs. 19,10,66,009/- as at 31/03/2007, meaning thereby that there are no new investments at the year end and the interest-free funds in the form of Share Capital & Reserves & Surplus are much in excess of the investments.. We find that the Hon'ble Bombay High Court in the case of HDFC Bank Ltd. vs. Deputy Commissioner of Income-tax and Others reported at [2016] 383 ITR 529 (Bom), dated 25/02/2016 and after referring to the decision of Bombay High Court in the case of CIT vs. Relince ....