TaxTMI 
TaxTMI 
2023 (2) TMI 574
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....t was framed u/s 143(3) of the Act vide order dated 24.12.2018 and the total income was determined at Rs.962,72,12,520/-. 4. Aggrieved by the order of AO, assessee carried the matter before CIT(A) who vide order dated 10.03.2021 in Appeal No.CIT(A), Delhi-11/10345/2018-19 granted partial relief to the assessee. Aggrieved by the order of CIT(A), Revenue and Assessee are now in appeal and has raised the following grounds: Revenue's grounds of appeal in ITA No.885/Del/2021 for A.Y. 2016-17 : 1. The Ld. CIT(A) erred in law and on facts in holding that interest-bearing funds had been utilized for making the investments in question even though the provision of Rule 8(2)(ii) talks of 'expenditure by way of interest during the previous year which is not directly attributable to any particular income or receipt' meaning thereby that, if interest expenditure which is not directly relating to income which does not form part of total income has been incurred by the assessee, it is mandatory to make proportionate disallowance of the same in accordance with the formula laid down in the said Rule 8(2)(ii). 2. The appellant craves to add, amend any/all the grounds of appeal before or during ....
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....es in earlier years. AO, therefore, concluded that certain expenses must have been incurred by the assessee to make such investments. He, thereafter, by applying the method prescribed under Rule 8D worked out the aggregate disallowance u/s 14A of the Act at Rs.55.96 crore, and made its disallowance. 6. Aggrieved by the order of AO, assessee carried the matter before CIT(A). CIT(A) deleted the addition made by AO by observing as under: "5.3.7 I find no reason to differ with the above findings of CIT(A) as well as Hon'ble ITAT in the appeals of the appellant itself. I have taken note of the fact that the total amount of interest bearing funds borrowed by the appellant Society comprises of Short Term Loans (12012 cr) and CC (2103 Cr) during the year, whereas its total requirement of Working Capital and Fixed Assets amounts to Rs 14.307 crores. Moreover, I have also taken note of the evidences placed on record by the Ld. AR in the form of Sanction letter of various Banks etc , wherein, it has been clearly mentioned that the funds are being sanctioned specifically for capital expenditure and/or other purposes in compliance with End- Use Guidelines dated 01.07.2005 of the RBI as amend....
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....there has been no case of levy of penal interest or the bank had recalled of the loan for violations of End-Use Compliance. Learned AR, therefore, submitted that since no interest bearing funds which has been borrowed during the year under consideration have been used for the purpose of making investment, therefore, no disallowance of interest expenditure could be made by invoking the provision of Rule 8D2(ii) of the Income-tax Rules. He further submitted that in a situation where the assessee has mixed funds and investments are made out of mixed funds, then it is to be presumed that investments have been made out of interest free funds as held by various judicial pronouncements. He further submitted that CIT(A) had followed the order of his predecessor for A.Ys. 2009-10 to 2011-12 and the order of CIT(A) in those years have been affirmed by the Tribunal. He, thereafter, submitted that the order of the Tribunal for A.Y. 2011-12 has also been upheld by Hon'ble Delhi High Court in the case of PCIT vs. IFFCO Ltd. in ITA No.287/2022 order dated 21st August 2022. He placed on record the copy of the aforesaid decision. He, therefore, submitted that since the facts of the case in the year....
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....though the assessee has raised various grounds but the only effective ground that requires adjudication is Ground No.4. 13. During the course of assessment proceedings, AO has noted that assessee has earned tax free income by way of dividend. He also noted that assessee had investment amounting to Rs.1701.83 crores as against investment of Rs.798.49 crores during the immediate preceding assessment year. AO also noted that assessee had incurred interest expenditure. AO was of the view that interest bearing funds have been used for making investments. He, therefore, by invoking the provision of Rule 8D read with Section 14A of the Act worked out the disallowance under Rule 8D(2)(iii) of the Income-tax Rules at Rs. 6.25 crores and on account of disallowance of interest expenditure under Rule 8D(2)(ii) worked out the disallowance of Rs.49.71 crores and thus the aggregate disallowance worked out by AO was at Rs.55,96,00,000/-. 14. Aggrieved by the order of AO, assessee carried the matter before CIT(A) who granted partial relief to the assessee by deleting the disallowance to the extent of Rs.49.71 crore but upheld the disallowance under Rule 8D(2)(iii) of Rs.6.25 crores. Aggrieved by ....