Priya Soparkar v. Itr 340 (Bom

Priya Soparkar IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.1374 OF 2016 Pr.Commissioner of Income Tax-3, Mumbai… Appellant V/s. M/s SICOM Limited … Respondent --- Mr.Sham Walve for the Appellant. Mr.Hiten Chande i/by M/s PDS Legal for the Respondent. --- CORAM : AKIL KURESHI AND M.S.SANKLECHA, JJ. DATE : JANUARY 22, 2019. P.C.:- 1.This Appeal under Section 260-A of the Income Tax Act,1961 (the Act), challenges the order dated 5[th] August, 2015passed by the Income Tax Appellate Tribunal (the Tribunal). ThisAppeal relates to Assessment Year 2008-09. 2.The Revenue urges the following question of law for ourconsideration: “Whether on the facts and in the circumstances ofthe case and in law the Tribunal has erred indeleting the diallowance on account of proportionate interest of Rs.7,87,70,940/- u/s14A r.w.r. 8d(2) (ii) without considering the factthat the amount of disallowance u/s 14A has to becomputed as per Rule 8D of the Income Tax Rules,1961?” 3. The respondent-assessee is a non-banking finance company. In its return of income for the Assessment Year 2008-09 therespondent claimed an income of Rs.52.40 lakhs as exemptdividend income and made a suo-moto diallowance ofRs.52,934/- being the expenditure incurred for earning exemptincome. However, in the assessment proceedings the AssessingOfficer held that the subject Assessment Year 2008-09 thedisallowance of expenditure to earn exempt income has to bemade under Section 14-A of the Act r/w Section 8D(2)(ii) of thesaid Rules. Thus, making disallowance of expenditure to the extentof Rs.8.39 crores in the aggregate inter-alia consisting ofproportionate disallowance of interest paid to the extent ofRs.7.87 crores in the Assessment Order dated 26[th] November,2010. 4. Being aggrieved with the Assessment Order dated 26[th]November, 2010 to the extent of disallowance of proportionate interest paid of Rs.7.87 crores, the respondent preferred anappeal to the Commissioner of Income Tax (Appeals)(CIT(A). Byan order dated 20[th] December, 2011 the CIT(A) deleted thedisallowance made under Section 14A of the Act on account ofthe proportionate interest paid on borrowed funds to the extent ofRs.7.87 crores. 5. Being aggrieved with the order of the CIT (A) on the aboveaccount, the revenue filed an appeal before the Tribunal. Theimpugned order of the Tribunal on facts found that theinvestments made in shares which resulted in exempt incomewas out of its own funds and not out of borrowed funds. Theimpugned order of the Tribunal upheld the reliance by the CIT(A)upon the decision of this Court in case of CIT v/s RelianceUtilities and Power Ltd.[1],to delete the addition made by theAssessing Officer. This is in the above case, this Court held thatwhere funds available are both interest-free and interest-bearingthen presumption is that investment in shares would be out ofinterest-free funds. Thus, dismissed the revenue's appeal. 6.We find that on facts both the CIT (A) as well as Tribunalhave rendered a concurrent finding that the investment made inshares which gave rise to exempt income was made out of its ownfunds and not out of borrowed funds i.e. interest bearing funds. In such a case this Court in CIT Vs. HDFC bank[1] has in identicalcircumstances held that the principle laid down in RelianceUtilities and Power Ltd.(supra) would equally apply whilecomputing the disallowance under Section 14A of the Act. Thus,no fault can be found with the impugned order dated 5[th]August, 2015 of the Tribunal. 7.In the above view, the question as proposed does not giverise to any substantial question of law. Thus, no entertained. 8.Accordingly, tax appeal is dismissed. No order as to costs. (M.S.SANKLECHA,J.) (AKIL KURESHI,J.) ….