2018 (5) TMI 1021

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....ext financial year as the assessee is following mercantile system of accounting. (ii) On the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the disallowance made u/s 14A read with rule 8D to Rs. 19,35,95,000/-, as disallowance was made by the assessing office under section 14A as per the provision of section 14A read with rule 8D(2)(ii) & 8D(2)(iii). (iii) The appellant craves leave to add, alter or amend any of the grounds of appeal before or during the course of hearing of the appeal. ITA 4168/Del/2014 (Assessee's appeal) "That the Grounds raised hereunder are without prejudice of one another. 1. That on the facts and in the circumstances of the case, the learned CIT (A) erred in upholding the disallowance of Rs. 1,05,48,0001- without appreciating the assessee's submissions that assessee has not incurred any expenditure to earn the income which do not form part of the total income. 2. That the appellant craves leave to reserve to itself That on the facts and in the circumstances of the case, the learned CIT (A) has erred in upholding the action of the AO in straightway applying Rule 8D automatically wi....

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....ring the dates ofpayment duly certified by the Tax Auditors. The Id. AR of the appellant has submitted that the issue is squarely covered by the decision of Hon'ble ITAT in ITA Nos. 3350/Del/2009 and 1194/De1/2011 for A.Ys. 2005-06 and 2006-07 in the appellant's own case. The respective orders of the Hon'ble ITAT, Delhi mentioned above have been placed on record by the Id. AR at Annexure B/Pg. 52/PB and Annexure C/Pg, 69/PB. In these orders, on similar facts, Hon'ble ITAT has given its decision in favor of the appellant by holding that the payments have been audited by the Tax Auditors and the assessee has filed the details of payments, hence the assessee is entitled for deduction u/s. 43B of the Act. In fact, in the appellant's own case for A.Y. 2006-07, the Hon'ble Delhi High Court has also dismissed the Revenue's appeal on this issue in ITA No. 1291/2011 vide order dt. 22.12.2011, placed on record at Annexure E/Pg. 84/PB. In the light of the above mentioned judgments of Hon'ble ITAT, Delhi and Hon'ble Delhi High Court in the case of the appellant itself for various assessment years on the same facts, it is held that the appellant is entitled t....

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....i) of Income Tax Rules, 1962. Accordingly, the disallowance made by the AO under Rule 8D(2)(ii) amounting to Rs. 19.35,95,000/- is hereby deleted. 4.11 As regards the arguments put forth by the Id. AR regarding incorrect inclusion in Section 14A category investments of the amounts invested by the appellant Society in OMIFCO, Oman and in other Co-operative Societies, income from which is deductible u/s, 80P(2)(d), the ld. AR of the appellant has submitted as under: (a) The investment in OMIFCO, Oman was governed by the provisions of Article 25 of DT AA between Government of India and Government of Sultanate of Oman and therefore, the dividend received from such investment made by the appellant society would not be hit by the provisions of Sec.14A r.w. Rule 8D(2)(iii). He has relied upon the decision of Hon'ble ITAT, Mumbai in the case of DCIT vs. Trigyn Technologies Ltd. (2013) TII-169-ITATMum- TP, and in the judgment of Hon'ble Gujarat High Court m the case of Suzlon Energy Ltd. (2013) 354 ITR 630 (Guj). (b) The income arising out of investment in other Co-operative Societies made by the appellant Society is eligible for deduction u/s. 80P(2)( d) of the A....

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.... the total disallowance u/s. 14A cannot exceed the total amount of exempt income, I am in agreement with this contention in principle. However, it is for the AO to go through the accounts of the appellant Society and to come to a conclusion as to what constitutes the total amount of exempt income and then take a decision accordingly." 9. Ld.CIT, DR submitted that this Tribunal for A.Y. 2008-09 in assessee's own case has set aside the issue to Ld.AO to verify the interest expenditure that is attributable to earning of exempt income under Rule 8D(2)(iii). He submitted that assessee has been maintaining a common pool wherein interest bearing and non-interest bearing funds are kept together. He submitted that before the authorities below assessee has not provided any bifurcation and from the records it is apparent that assessee had borrowed funds amounting to Rs. 12802 crores during the year on which interest was payable by assessee against investments of Rs. 392.64 crores. Ld.CIT DR placed reliance on specific observations of this Tribunal for A.Y. 2008-09 in ITA no.2394/Del/2013 in order dated 05.04. 2018 which is as under. "3.2. Now coming to the 2nd part of the....