2023 (7) TMI 855

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.... Faceless Appeal Centre, ["learned CIT(A)"], for the assessment year 2014-15. 2. In its appeal, the assessee has raised the following grounds:- "1. The Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (hereinafter referred to as "the CIT(A)") erred in upholding the disallowance of interest of Rs 80,08,92,309/- and expenses of Rs. 8,21,54,351 under section 14A of the Income-tax, 1961 (hereinafter referred to as "the Act") r.w. Rule 8D of the Income Tax Rules, 1962 (hereinafter referred to as "the Rules") to normal provisions of the Act as well as for computation of book profit under section 115JB of the Act. The reasons given by him for doing so are wrong. contrary to the facts of the case and provisio....

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....statutory notices under section 143(2) read with section 142(1) of the Act were issued and served on the assessee. During the assessment proceedings, it was observed that the assessee has earned a dividend income of Rs. 48,28,05,816, which was claimed as exempt under section 10(34) of the Act. From the profit and loss account, it was observed that the assessee has debited an amount of Rs. 84,05,56,839 as interest on the loan paid. Further, in the balance sheet, the assessee has shown a total investment of Rs. 1643,08,70,195. However, the assessee had suo moto disallowed only Rs. 8,21,54,351, i.e. 0.5% of average investment under section 14A of the Act. Accordingly, the assessee was asked to explain as to why disallowance under section 14A r....

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....oto disallowed Rs. 8,21,54,350.98 under section 14A read with Rule 8D. From the annual report of the assessee for the financial year 2011-12, we find that the scheme of amalgamation between Essel Business Process Ltd and the assessee was sanctioned by the Hon'ble Bombay High Court on 02/12/2011, w.e.f. 15/10/2011. We further find that as on 31/03/2011 the value of investment in the books of account of the assessee was nil. However, as on 31/03/2012, i.e. after the aforesaid amalgamation, the value of the investment was increased to Rs. 164308.70 lakhs. From the balance sheet of Essel Business Process Ltd, we find that as on 15/10/2011, i.e. on the date of the amalgamation, the total value of the investment was Rs. 27 only in the 130,888,822....

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....4.94 lacs as on 31/03/2014. We further find that there is no change in the value of investment since 31/03/2012. However, even on 31/03/2012, the assessee had a share capital of Rs. 95.00 lacs and reserves & surplus of Rs. 98,054.37 lacs, i.e. more than the value of balance investment of Rs. 17647.77 lacs. Therefore, it is sufficiently evident that the assessee's own funds are more than investments, including the investments for earning exempt income. We find that the Hon'ble Jurisdictional High Court in CIT vs HDFC Bank Ltd., [2014] 366 ITR 505 (Bom.) held that where assessee's own funds and other non-interest bearing funds were more than the investment in tax-free securities, no disallowance under section 14A of the Act can be....