TaxTMI 
TaxTMI 
2025 (8) TMI 1283
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.... of investment with own funds and no borrowed funds have been utilized for investments? (ii) Whether on the facts and circumstance of the case and in law Hon'ble ITAT was right in directing to delete the addition made under Section 40(a)(ia) of the I.T.Act without appreciating the fact that the assessee failed to deduct tax at source as per provisions contained in chapter XVIIB of the I.T. Act? (iii) Whether on the facts and in the circumstances of the case whether the Hon'ble ITAT was correct in law in deleting the disallowance made under Rule 8D(2)(ii) in view of the recent decision of the Hon'ble Supreme Court in the case of Avon Cycles Ltd (Civil Appeal No. 1423/2015) wherein the disallowance under Rule 8D(2)(ii) in case of mixed use of funds was upheld? 2. To see whether the aforesaid questions as projected by the Revenue in fact gives rise to any substantial question of law, it would be necessary to refer to some facts. In the present case, the Respondent Assessee filed its return of income on 23rd September 2009 declaring a total income of Rs. Nil. Thereafter, the Assessee's case was taken up for scrutiny and the Assessing Officer passed an order under S....
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.... Court in the case of South Indian Bank Ltd V/S Commissioner of Income-tax [(2021) 130 taxmann.com 178 (SC)]. In both these judgments it has been clearly held that where the assessee's own funds and other non-interest bearing funds, were more than the investment made in tax free securities, it would be presumed that the investment made by the assessee would be from its interest free funds. For the sake of convenience the relevant portion of the decision of the Hon'ble Supreme Court in South Indian Bank Ltd (supra) [on this issue] is reproduced hereunder:- "14. We have heard Mr. S. Ganesh, Mr. S.K. Bagaria, Mr. Jehangir Mistri and Mr. Joseph Markose, learned Senior Counsel appearing for the appellants. Also heard Mr. Vikramjit Banerjee, learned Additional Solicitor General and Mr. Arijit Prasad, learned Senior Counsel on behalf of the respondent/Revenue. 15. The appellants argue that the investments made in bonds and shares should be considered to have been made out of interest free funds which were substantially more than the investment made and therefore the interest paid by the assessee on its deposits and other borrowings, should not be considered to be expendi....
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.... Taxman 165/410 ITR 466 (SC), where a Division Bench of this Court expressly held that where there is finding of fact that interest free funds available to assessee were sufficient to meet its investment it will be presumed that investments were made from such interest free funds. 19. In HDFC Bank Ltd. v. Dy. CIT [2016] 67 taxmann.com 42/383 ITR 529 (Bom.), the assessee was a Scheduled Bank and the issue therein also pertained to disallowance under section 14A. In this case, the Bombay High Court even while remanding the case back to Tribunal for adjudicating afresh observed (relying on its own previous judgment in same assessee's case for a different Assessment Year) that, if assessee possesses sufficient interest free funds as against investment in tax-free securities then, there is a presumption that investment which has been made in tax-free securities, has come out of interest 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 v. Suzlon Energy Ltd. [2013] 33 taxmann.com 157/215 Taxman 272/354 ITR 630 (Guj.), CIT v. Microlabs Ltd. [2017] 79 taxmann.com 3....
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....if there is any shortfall due to the difference of opinion as to the taxability of any item, or the nature of payments falling under various TDS provisions, the assessee can be declared as an assessee in default under Section 201, but no disallowance can be made by invoking the provisions of Section 40(a)(ia) of the IT Act. Apart from the fact that we are in agreement with the decision of the Calcutta High Court, we also find that with effect from 1st April 2013 a very important proviso [second proviso to 40(a)(ia)] was inserted by the legislature which stipulated that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum, but is not deemed to be an assessee in default under the first proviso to sub-Section (1) of Section 201, then, for the purpose of sub-clause 40(a)(ia), it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the payee referred to in the said proviso. For the sake of convenience, the relevant proviso is produced hereunder:- [Provided further that where an assessee fails to deduct the whole or any part of....