TaxTMI 
TaxTMI 
2024 (10) TMI 930
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....t we take up ITA No.270/Chny/2024 for assessment year 2018-2019 as lead case for adjudication wherein only surviving issue is with regard to disallowance u/s 14A of the Act r.w. Rule 8D of the IT Rules. Our decision on this issue will equally apply to other appeals being ITA Nos. 271/Chny/2024 also. 3. Brief facts of the case are that: NLC India Limited (formerly Neyveli Lignite Corporation Limited) (NLCIL/Appellant) is a Navratna, Government of India enterprise registered under the Indian Companies Act 1956, engaged in mining of lignite and power generation. NLCIL is a Central Government Public Sector Undertaking (PSU) functioning under the administrative control of the Ministry of Coal. NLCIL operates mines at the following locations: ....
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....ividend Income. Therefore, the Assessee did not consider any amount as disallowance under Section 14A of the IT Act. The Ld. Assessing Officer has made addition of Rs. 24,21,37,000/- w.r.t. Section 14A of the IT Act. 4. Aggrieved with the assessment order, appeal has been filed before the ld.CIT(A). The ld. CIT(A) partly upheld the disallowance u/s 14A and restricted the disallowance to Rs. 19,47,35,738/- following the judgment of the jurisdictional High Court in the case of Marg Ltd. Vs CIT (2020) 120 taxmann.com 84 (Madras) and deleted the other additions made by the AO. Now assessee is in further appeal before us. 5. Before us, the ld. Counsel submitted as under:- It is humbly submitted that the Assessee had sufficient interest free ....
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..... 6. Per contra the ld. CIT-DR Mr. R. Clement Ramesh Kumar, vehemently supported the impugned order of the ld. CIT(A). He further contended that during the year the appellant has incurred 204.98 crore as interest expenses, and debited in its books of accounts. In addition to that certain other expenses which includes director salary, rent, communication cost, legal & professional expenses, travelling, printing, stationery etc., have also been debited in the books of account which would have incurred necessarily towards earning exempt income. However, the appellant could not establish with supporting proof that the reserves has been utilized for non taxable entity & the loan for which interest expenses has been incurred is for the taxable e....
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....mixed fund, the investment must be considered to have been made out of Page 9 of 22 the interest free fund. To put it another way, in respect of payment made out of mixed fund, it is the assessee who has such right of appropriation and also the right to assert from what part of the fund a particular investment is made and it may not be permissible for the Revenue to make an estimation of a proportionate figure. For accepting such a proposition, it would be helpful to refer to the decision of the Bombay High Court in Pr. CIT v. Bombay Dyeing and Mfg. Co. Ltd2 where the answer was in favour of the assessee on the question, whether the Tribunal was justified in deleting the disallowance under Section 80M of the Act on the presumption that when....
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....t free funds available with assessee. In such situation Section 14A of the Act would not be applicable. Similar views have been expressed by other High Courts in CIT Vs. Suzlon Energy Ltd.5, CIT Vs. Microlabs Ltd.6 and CIT Vs. Max India Ltd.7 Mr. S Ganesh the learned Senior Counsel while citing these cases from the High Courts have further pointed out that those judgments have attained finality. On reading of these judgments, we are of the considered opinion that the High Courts have correctly interpreted the scope of Section 14A of the Act in their decisions favouring the assessee's. 20. Applying the same logic, the disallowance would be legally impermissible for the investment made by the assessee's in bonds/shares using interest free f....
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.... and the Government should endeavour to keep it convenient and simple to achieve maximization of compliance. Just as the Government does not wish for avoidance of tax equally it is the responsibility of the regime to design a tax system for which a subject can budget and plan. If proper balance is achieved between these, unnecessary litigation can be avoided without compromising on generation of revenue. 30. In view of the forgoing discussion, the issue framed in these appeals is answered against the Revenue and in favour of the assessee. The appeals by the Assessee's are accordingly allowed with no order on costs''. 9. Having gone through the Hon'ble Supreme Court judgment in the case of South Indian Bank Ltd. (supra), we find strength ....