Afl P. Ltd, Mumbai vs Assessee

आयकर अपील य अ धकरण, मुंबई IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES "A" MUMBAI सव ी आय.पी. बंसल, या यक सद य एवं ी राजे , लेखा सद य BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND

SHRI RAJENDRA, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.5452/MUM/2013 नधा रण वष /Assessment Year 2010-11 AFL Private Limited, बनाम/ The Asstt. Commissioner AFL House, of Income Tax, Vs. Lok Bharati Complex, Central Cir.13, Marol Maroshi Road, 10 t h Floor, CGO Bldg., Andheri(E), Mumbai. Mumbai 400 059

थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AAABCA 2212P

(अपीलाथ /Appellant) .. ( यथ / Respondent)

Appellant by Shri Nitesh Joshi Respondent by Ms. Tripura Sundari सनु वाई क तार"ख / Da te o f Hearing : 04/06/2015 घोषणा क तार"ख /Date of Pronouncement : 04/06/2015

आदे श / O R D E R

PER I.P.BANSAL, J.M:

This is an appeal filed by the assessee and it is directed against order passed by Ld. CIT(A)-37, Mumbai dated 30/5/2013 for assessment year 2010-

11. Grounds of appeal read as under:

"1) The learned Commissioner of Income Tax (Appeals) erred in confirming disallowance of Rs. 80,43,834/- made by the Assessing Officer under section 14A of the Income Tax Act, 1961 read with Rule 8D of the Income Tax Rules, 1962.

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2) The learned Commissioner of Income Tax (Appeals) ought to have considered that the Assessing Officer has not given any reasons as to why he is not satisfied with the calculation of disallowance u/s 14A made by the appellant.

3) The learned Commissioner of Income Tax (Appeals) erred in confirming invoking of Rule 8D for calculation of disallowance u/s 14A in the present case.

4) The appellant submits that even under Rule 8D the proportionate interest in this case is not disallowable as the investment has been made out of non interest bearing fund.

5) The learned Commissioner of Income Tax (Appeals) erred in dismissing the ground of appeal regarding not giving credit for full amount of TDS.

6) The learned Commissioner of Income Tax (Appeals) erred in not giving a direction to allow credit of balance TDS after verification."

2. Ground No.1 to 4 relates to one issue i.e. regarding disallowance made under section 14A r.w. Rule 8D of the Income Tax Act, 1961 (the Act). Disallowance has been calculated by the AO at a sum of Rs.82,41,961/- as per following table.

Particulars Rs. Rs. Disallowance under clause(i) Disallowance under clause (ii) A. Amount of interest 4,37,54,138/- B. Average Value of Investments Value of Investments as on 31.03.2009 26,55,29,855/- Value of investments as on 31.03.2010 30,75,04,355/- Total: 57,30,34,210/- Average value of Investments 28,65,17,105/- C. Average Value of Total assets Book value as on 31-03-2009 181,28,61,114/- Book value as on 31-03-2010 186,92,11,879/- Total 368,20,72,993/- Average value of total assets 184,10,36,497/- Disallowance under clause (ii) [(A*B)/C] 68,09,376/- Disallowance under clause (iii) 0.5% of the Average value of Investments 14,32,586/- Total Disallowance (i)+(ii)+(iii) 82,41,961/-

2.1 Ld. CIT(A) has upheld the disallowance following his predecessors order

for A.Y 2008-09. The assessee is aggrieved, hence, has filed aforementioned grounds of appeal.

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3. At the outset it was submitted by Ld. AR that this issue is covered by the earlier orders of the Tribunal, wherein the Tribunal has accepted the proposition that in view of own funds of the assessee, disallowance of interest was not called for and this proposition was accepted by the Tribunal in assessment year 2008-09 vide order dated 14/08/2013 in ITA No.3123& 951/Mum/2012 copy of the same was placed on our record and reference was made to para 6.7 of the order, which read as under:

"6.7 So however, a mere browse of the assessee's balance-sheet for the relevant yearend (PB pgs.4-16), reveals term loans (from banks) at Rs.2864.87 lacs and working capital advances (from banks) at Rs.1401.12 lacs. The corresponding year-end balances of fixed assets (net of depreciation) and net current assets are at Rs.5237.52 lacs and Rs.3328.29 lacs respectively, signifying complete absorption of the borrowed funds for the specified purposes, i.e., for which they stand contractually availed. The assessee, therefore, in our view, has a strong prima facie case of entire bank borrowings being applied for the respective purposes, so that no part thereof could be said to have been invested in relevant securities yielding tax-free income. If so, no part of the interest expenditure thereon could be attributed to the said investments on the assumption of the same comprising the general pool of funds. The matter, accordingly, is to be restored to the file of the A.O., who shall confirm the utilization of the borrowed funds for the specified purposes for the entire year, returning a finding in the matter. Where so, the proportionate formula would apply by excluding the corresponding assets. As such, if an asset of Rs.100/- is financed by bank borrowings to the extent of Rs.75/-, assets to that extent (Rs.100/-) would stand excluded in computing the proportionate formula under rule 8D; the financing of the said asset having been established."

3.1 It was further submitted that in respect of assessment year 2009-08, Tribunal following the aforementioned order has also restored back the issue to the file of AO as per papra-6. Reference was made to the order dated 12/11/2014 in ITA No.958/Mu/2013, copy placed on record. The observation read as under:

"6. We have heard both the parties and perused the orders of the Revenue Authorities as well as the cited order of the Tribunal (supra) dated 14.8.2013. On perusal of the said order of the Tribunal, we find, the similar issue was adjudicated by the ITAT and remanded the matter to the file of the AO. Para 7 of the said Tribunal's order (supra) is relevant in this regard. Considering the importance of the said para 7, the same is extracted which reads as under:

7. In our clear view, therefore, the initial onus to state its case qua the claimed disallowance u/s.14A is on the assessee, which is to be made with reference to its

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accounts and/or other records, with the A.O. obliged to allow the assessee an opportunity to prove the same. Then the A.O. is to examine the same with a view to satisfy himself as to its correctness, stating the reasons for his objective satisfaction, or not so, as the case may be, and proceed accordingly. In the instant case, the said initial onus having been clearly not discharged by the assessee, which finding has been endorsed by us, the disallowance cannot be impugned for want of noncompliance of the procedure laid down u/s.14A(2). Again, however, as we observe, none of the parties or their representatives have even as much as cared to look at the facts, which prima facie reflect an apparent case of bank borrowings having been availed for and utilized for specified purposes, so that the interest thereon could not be subject to apportionment on the basis of general pool of funds hypothesis, which would otherwise prevail. We can only express our anguish at this clear disregard for facts, which are of prime relevance in deciding any case; on the contrary, raising a host of irrelevant legal issues before us. The matter must, therefore, travel back to the file of the A.O. to allow the assessee an opportunity to state its case in the matter, who shall decide the same in accordance with the law, issuing definite findings of fact. The relevant grounds are decided accordingly.

7. Considering the above, we are of the opinion that the Tribunal has rightly remanded the matter to the file of AO for fresh adjudication and speaking order. Respectfully, following the said decision of the Tribunal as well as following the principle of consistency, we remand the issue under consideration to the file of AO with identical directions given in the said order of the Tribunal. Accordingly, ground nos. 1 to 4 raised by the assessee are allowed for statistical purposes."

3.2 Ld. AR further submitted that deletion of disallowance of interest on account of own funds of the assessee has been accepted by Hon'ble High Court in the case of CIT vs. HDFC Bank Ltd., in I.T. Appeal No.330 of 2012 order dated 23/07/2014. Thus it was submitted by Ld. AR that grievance of the assessee is regarding disallowance of interest calculated under Rule 8D calculation at a sum of Rs.68,09,376/- and for verification of the own funds of the assessee the matter may be restored back to the file of AO in line with the earlier decision of the Tribunal in assessee's own case.

4. On the other hand, Ld. DR relied upon the order passed by AO and Ld. CIT(A).

5. We have heard both the parties and their contentions have carefully been considered. After hearing both the parties, respectfully following the aforementioned decision of the Tribunal in assessee's own case we restore this issue to the file of AO for re-computation of disallowance under section 14A r.w. Rule 8D in the similar manner as has been directed in the aforementioned 5 आयकर अपील सं. / ITA No.7630/MUM/2013 नधा रण वष /Assessment Year 2010-11

orders of the Tribunal. We direct accordingly. For statistical purposes ground No.1 to 4 are treated as allowed in the manner aforesaid.

6. Apropos Ground No.5 & 6, it was submitted by Ld. AR that Ld. CIT(A) has directed the assessee to file application under section 154 to claim appropriate relief and the same has been filed vide letter dated 5/4/2013, but AO till date has not decided the said application. It was submitted that the AO may be directed to dispose of the application filed by the assessee expeditiously.

7. After hearing both the parties, since assessee has already filed an application under section 154, we direct the AO to dispose of the said application of the assessee after giving the assessee a reasonable opportunity of hearing within a period of two months from the date of receipt of this order. We direct accordingly. These grounds are allowed for statistical purposes in the manner aforesaid.

8. In the result, appeal is considered to be allowed for statistical purposes in the manner aforesaid.

Order pronounced in the open court on 04/06/2015 आदे श क घोषणा खल ु े यायालय म) *दनांकः 04/06/2015 को क गई ।

Sd/- Sd/- ( राजे , / RAJENDRA) (आय.पी. बंसल / I.P. BANSAL) लेखा सद य / ACCOUNTANT MEMBER या यक सद य / JUDICIAL MEMBER मुंबई Mumbai; *दनांक Dated 04/06/2015 6 आयकर अपील सं. / ITA No.7630/MUM/2013 नधा रण वष /Assessment Year 2010-11

आदे श क त ल प अ!े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. आयकर आयु.त(अपील) / The CIT(A)- 4. आयकर आयु.त / CIT

5. /वभागीय त न1ध, आयकर अपील"य अ1धकरण, मुंबई / DR, ITAT, Mumbai

6. गाड फाईल / Guard file.

आदे शानुसार/ BY ORDER, स या/पत त //True Copy//

उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मुंबई / ITAT, Mumbai व. न.स./Vm, Sr. PS