TaxTMI 
TaxTMI 
2020 (11) TMI 339
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....ing grounds of appeal:- "1. The order of The Commissioner of Income tax (Appeals) is contrary to law, facts and circumstances of the case. 2. The Commissioner of Income tax (Appeals) erred in confirming the disallowance u/s.14A of Rs. 9,06,067/-. 3. The Commissioner of Income tax (Appeals) ought to have appreciated that no part of the borrowed funds were utilised for making investments and hence no part of the interest payable on borrowing can be disallowed. 4. The Commissioner of Income tax (Appeals) ought to have appreciated that investment of Rs. 7,35,02,8951 - was in a firm M/s.Chiral Solutions in which the Assessee had made initial investment of Rs. 1, 50,00,0001 - for the assessment year 2009- 10 an....
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....ing expenses incurred in relation to exempt income. The assessee has also submitted the details of exempt income and has also furnished total investments as on 31.03.2012 at Rs. 9.91 crores and total value of assets on 31- 03-2012 which was at Rs. 39.09 crores/-. The Assessing Officer after considering the submissions of the assessee observed that although the assessee has earned huge exempt income but has failed to disallow expenses relating to exempt income and hence was of the opinion that it is unrealistic to state that none of the expenses including salary, administrative expenses can be attributable to earning of exempt income and accordingly invoked Rule 8D of Income Tax Rules and determined the disallowance of interest of Rs. 49,96,....
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....e 8D(2)(iii) of I.T.Rules, 1962. The learned CIT(A) after considering the submissions of the assessee and has taken note of certain judicial precedents including the decision of ITAT., Chandigarh Bench in the case of ACIT Vs.Anil Kumar Singhania (2014) 51 ITR 98) observed that there is no error in the findings recorded by the Assessing Officer to disallow the interest expenditure under the 2nd limb of Rule 8D on pro rata basis because from assessment year 2008-09 onwards disallowance u/s.14A needs to be computed in accordance with prescribed formula provided under Rule 8D of I.T.Rules, 1962, whether or not the assessee is having interest free funds. Similarly, as regards disallowance under 3rd limb of Rule 8D, the learned CIT(A) observed th....
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....disallowance u/s.14A of the Act. 7. We have heard both the parties, perused the material on record and gone through the orders of authorities below. As regards disallowance of interest expenditure under Rule 8D(2)(ii), it is well settled principle of law that when sufficient own fund is available, which is over and above the value of investments, then the question of disallowance of interest expenditure does not arise. This principle is supported by the decision of the Hon'ble Bombay High Court in the case of HDFC Bank Ltd.(supra), where it was held that assessee's capital, profit, reserves, surplus and current account deposits were higher than the investments in tax free securities would have to be presumed that investments made by the ....
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....es only and remaining balance was out of accrued profit of the firm which needs to be excluded while computing average value of investments. This aspect needs verification from the Assessing Officer because the facts are not clear as the Assessing Officer stated that investments in partnership firm is at Rs. 7.35 crores, whereas the assessee claimed investment in partnership firm is Rs. 1.5 crores. Similarly, as regards investments in mutual funds, the assessee claims that investment in mutual funds which suffers capital gain tax needs to be taken out of average value of investments. We have given our thoughtful consideration to arguments of the assessee in light of provisions of section 14A of the Act, and we are of the considered view tha....