TaxTMI 
TaxTMI 
2025 (3) TMI 1730
X X X X Extracts X X X X
X X X X Extracts X X X X
....(A)"] pertaining to assessment order u/s 143(3) of the Income-tax Act, 1961 [hereinafter referred to as "Act"] dated 06.12.2016 as passed by the Dy. Commissioner of Income Tax, Circle-4(1)(1), Mumbai for the Assessment Years [A.Y.] 2014-15 & 2015-16. Since the grounds of appeal and facts of the case are identical and also the appeals having been heard together, both these appeals are being adjudicated in this composite order for the sake of brevity. We take up ITA No.125/Mum/2025 as the 'Lead case' below: 2. The grounds of both appeals are as under:- ITA 125/MUM/2025(AY 2014-15) 1. The learned Commissioner of Income-tax (Appeals) has erred in confirming the action of the assessing officer in disallowing an amount of Rs. 27,57....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as exempt during the year. Further, it allocated an amount of Rs. 34,378/- on account of expenditure incurred towards earning of the tax exempt dividend income as required by section 14A of the Act. The AO made disallowance of Rs 27,57,464/- u/s 14A of the Act. 4. The ld.CIT(A) has considered the issue at length in upholding the action of the AO. Before him, it was contented that the assessee had sufficient reserve and surplus and share capital in comparison to the investment made in dividend yielding instruments. However, it was noted by the ld. AO as well as by the ld.CIT(A) that the assessee did not consider the interest expenses incurred by the assessee for calculating disallowance u/s 14A of the Act, although it had shown huge inter....
X X X X Extracts X X X X
X X X X Extracts X X X X
....val submissions and perused materials on record. The ld.DR has relied on the orders of authorities below. In principle, if there are funds available, both interest-free and over draft and/or loans taken, then a presumption would arise that investments would be out of the interest-free funds generated or available with the company if the interest-free funds were sufficient to meet the investment. It is noticed that the Share capital and Reserves and surplus in the relevant year amounted to Rs 1.49 cr. and Rs 12.83 cr. respectively aggregating to Rs 14.32 cr. as per the Balance Sheet as on 31.03.2014. On the other hand, the non-current investment made amounted to Rs 8.82 cr. Likewise in AY 2015-16, the Share Capital Reserve amounted to Rs 1.4....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in the case of CIT vs UTI Bank Ltd. [2022] 142 taxmann.com 136 and in South Indian Bank Ltd. v. CIT [2021] 438 ITR 1, likewise held that since interest free own funds available with assessee exceeded their investments in tax-free securities, investments would be presumed to be made out of assessee's own funds and proportionate disallowance was not warranted under section 14A of the Act. In this case, since interest free own funds available with assessee exceeded their investments; investments would be presumed to be made out of assessee's own funds and proportionate disallowance was not warranted under section 14A. 5.2 Respectfully following the above judicial precedents rendered by Hon'ble Apex Court and various High Courts....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... taxpayer they would be spread over a large number of voluminous activities, the variable expenses were computed at one-half per cent of the value of the investment." 6.1 Having considered the facts of the case and respectfully following the above decision, we confirm the disallowance of Rs. 4,54,023/- made by the AO. 7. In the result, the appeal of the assessee in ITA No. 125/Mum/2025 is partly allowed. ITA 126/MUM/2025(2015-6) 1. Disallowance u/s 14(A) of Rs. 21,14,912/-. The learned Commissioner of Income-tax (Appeals) has erred in confirming the action of the assessing officer in disallowing an amount of Rs. 21,14,912/- under rule 8D read with section 14A of the Income-tax Act 1961 as against of Rs 30,134/- di....