Income Tax Appellate Tribunal - Chandigarh
Acit, Panchkula vs The Haryana State Co-Operative Supply ... on 21 June, 2019
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ "ए", च डीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL,
CHANDIGARH BENCH "A" , CHANDIGARH
ी संजय गग , याय क सद य एवं ीमती अ नपण
ू ा गु'ता, लेखा सद य
BEFORE: SHRI SANJAY GARG, JUDICIAL MEMBER
AND SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER
आयकर अपील सं./ ITA No.1611/Chd/2018
नधा रण वष / Assessment Year : 2012-13
आयकर अपील सं./ ITA No.1612/Chd/2018
नधा रण वष / Assessment Year : 2014-15
&
आयकर अपील सं./ ITA No.1613/Chd/2018
नधा रण वष / Assessment Year : 2015-16
The A.C.I.T, बनाम M/s Haryana State Co-op
Panchkula Circle, Supply & Marketing
Panchkula. Federation Ltd.,
Sector 5, Panchkula.
थायी लेखा सं./PAN NO: A A A J H 0 0 2 2 R
नधा रती क ओर से/Assessee by : Shri Ashish Gupta, CIT(DR)
राज व क ओर से/ Revenue by : Shri Aman Parti, Adv.
सन
ु वाई क तार"ख/Date of Hearing : 23.05.2019
उदघोषणा क तार"ख/Date of Pronouncement:21.06.2019
आदे श/ORDER
Per Anna pur na G upta, Account ant Member Al l t he a b ove ap p e a l s re l a ti ng to th e sa me a sse ssee ha v e bee n p r e fer r e d b y th e Re ve nue . The a p pe a l i n I TA 2 ITA Nos.1611 to 1613/Chd/2018 A.Ys.2012-13, 2014-15 & 2015-16 N o.1 6 1 1 /C hd /2 0 1 8 is d i r e cte d a g a in st th e or de r of t he C om mis si on e r o f I n come Ta x ( A p p e a l s ), Pa n ch k ula (i n s hor t 'C I T( A) ' d a te d 2 2 .1 0 .2 0 1 8 r e la ti n g to a sse s sme n t ye a r ( A .Y) 20 1 2 -1 3 a nd the a p p e a l s i n I TA N os .1 6 1 2 & 1 61 3 / C h d/2 0 1 8 a re a ga i n st the co ns oli d a te d o rde r d a te d 2 3 .1 0 . 201 8 , p a sse d u/s 25 0 ( 6) of t he I n come Ta x Ac t, 1 96 1 ( he r e i na f ter re fe r re d to a s ' Act '), r e la t in g to A .Y . 2 01 4 -1 5 a n d 2 0 1 5- 16 .
S in ce common i ssu e i s in vol ve d in a l l the a p p e a l s, the se we re he a r d toge t he r a nd a re b e i ng d i sp ose d of f b y th is con sol id a t e d or de r for the sa ke of co nv e nie n ce .
We shall first be taking up the appeal in ITA No.1611/Chd/2018.
ITA No.1611/Chd/2018:
2. The sole ground raised by the Revenue relates to the assessee's claim of deduction u/s80P(2)(e) of the Act, of rental income earned by it from the letting out warehouses owned by it and the same reads as under:
"1. Whether on the facts and circumstances of the case the Ld. CIT(A)has erred in allowing the appeal of the assessee and delete the addition of Rs.8,69,01,552/- u/s 80P(2)(e) which is not correct because the same is not allowable to the assessee in the A. Y. 2012-13."3 ITA Nos.1611 to 1613/Chd/2018
A.Ys.2012-13, 2014-15 & 2015-16
3. At the outset it was pointed out that this was the second r ound be fore the I TA T, w ith the I TA T h aving re stored the issue to the CI T( A) in the first round to decide it in accordance with law after considering the evidences filed by the assessee with respect to its claim of deduction.
4. B e f ore the Ld .C I T( A ) de ta i le d sub mi ss ion s we r e f il e d by the a s se s se e c ont e n di n g t ha t the H on 'b l e Ju r is d ic tio na l H i gh C our t i n th e c a se of the a sse ssee it se l f ha d he l d th a t t he re nta l i nc ome e a rn e d f ro m le tting o ut of w a reho use s to outs id e rs wa s e li gi b le for de d ucti on u /s 8 0 P( 2 ) ( e ) of t he Act , wh i le the w are ho use i nc ome re l a tin g to stor a ge a n d sa le of th e f ood gr a i ns b y th e a sse ssee i tse lf w a s n ot en ti tle d to de du cti on u /s 8 0 P (2 ) (e ) of t he Ac t on th e c omp on e nt of stor a ge i nc ome in cl ud e d in t he sa l e p r ice . The Ld .C I T(A ) fu rt he r fo un d th a t t hi s fa c t h a d n ot b e e n di sp u te d b y t he C I T( A) in th e fi r s t r ou n d , w ho h a d di s a ll ow e d th e d e d uc ti on for the re a son t ha t th e a sse ss ee h a d n ot fi le d e vi de nce s to sub s ta nt ia te i ts c la i m. The Ld . C I T( A) a l so n ote d th a t t he a sse sse e h a d i n fa c t fi l e d a ll e vid e nce s. The r e for e a f te r con si de r in g the evi d e n ce s f ile d b y the a sse ssee of the re n tal in come e a rne d by it, the Ld . C I T( A) f oun d t ha t th e asse ssee 4 ITA Nos.1611 to 1613/Chd/2018 A.Ys.2012-13, 2014-15 & 2015-16 ha d r i gh tl y c la i m e d t he de d uc ti on u/s 8 0P ( 2 )( e ) of t he Ac t i n a ccor d a n ce w ith l a w a mou nt in g to Rs. 8 ,6 9 , 01 , 5 5 2 /-. The re le va n t f i nd i ng s of th e Ld. C I T( A) a t p a r a N os. 6 an d 6 . 2 of the or de r a re a s un de r :
"6. I have gone through the facts of the case, the written submission filed by the appellant' and the order of the Hon'ble IT AT, Chandigarh, in ITA No.48/CHD/2016 dated 30.10.2017. I find that the Hon'ble ITAT while adjudicating on the issue of allowability of deduction u/s 80P(2)(e) amounting to Rs.8,69,01,5527- in respect of the rent derived by the appellant from letting out the godowns for storage, processing etc. of commodities has remanded the issue back to this office and the appellant had filed evidences of having received rental income on letting out of the godowns during the period under consideration.
6.1 In the various decision of Hon'ble Tribunal and judgments of High Courts cited by the counsel of the appellant, it is mentioned that the benefit of deduction u/s 80P(2)(e) is allowable to assessee on the rental income received by it on letting out of godowns and warehouses for the storage, processing, etc. of foodgrains to other concerns while this deduction is not allowable on the income received by an assessee on storage of foodgrains which are owned by the assessee itself. This fact has not been disputed by the learned CIT appeal in the order which has been restored back to this office for reconsideration. The disallowance made by the AO was upheld by the learned CIT appeal on the ground that the appellant had failed to furnish evidence to show that the income derived out of storage of agricultural commodities was rental income received from other concerns and not the income out of storage of agricultural commodities owned by the appellant itself. The fact of the appellant having supplied the evidence of having on rental income was mentioned in the impugned order itself as below:
"8.1 During the appellate proceedings, the counsel for the appellant submitted that the appellant during the year under consideration received income on account of renting of its godowns for the purpose of storage, processing and 5 ITA Nos.1611 to 1613/Chd/2018 A.Ys.2012-13, 2014-15 & 2015-16 facilitating the marketing of agricultural commodities. Deduction claimed u/s 80P(2)(e) has been disallowed by the AO relying upon the ratio laid down by the Hon'ble Punjab and Haryana High Court in the appellant's own case in ITA No. 157, 159, 664 of 2005, 477 of 2006, 419 of 2007, 275 of 2009 and 246, 251 of 2010. The appellant further submitted that the deduction in respect of the income derived by the appellant by way of renting of godowns for the purpose of storage, processing and acilitating the marketing of agricultural commodities has been specifically held to be admissible u/s 80P(2)(e). In the present case, the appellant had let out some of its godowns where from rent was received. Documentary evidence in support of letting out of godowns on rent had been furnished by the appellant during the course of the assessment proceedings. Details of the calculations based on which the deduction had been claimed by the appellant had also been furnished by the appellant during the assessment proceedings. Copy of some of the agreements evidencing the receipt of renting of godowns for the purpose of storage, processing and facilitating the marketing of agricultural commodities was also submitted. So, the order of the AO in disallowing the deduction claimed u/s 80P(2)(e) in respect of the rent derived is erroneous as being against the facts of the case and also the judgment of the Hon'ble Punjab and Haryana High Court. "
6.2 In the year under consideration, it is apparent that the appellant has derived income from storage as well as rent of warehouses. The judgment of Hon'ble Punjab & Haryana High Court in appellant's own case and subsequently followed by Hon'ble ITAT, Chandigarh Bench has clearly established that the warehousing income related to storage and thereafter sale is not the same as rental income. The income on account of such storage has not been allowed/ however, with respect to the godowns which were hired out to the outsiders and not being used by the appellant for its own business, the rental income from such hiring is eligible for deduction u/s 80P(2)(e)| The appellant has filed documentary evidence in the form of copy of lease deeds in support of its contention of having actually let out its godowns on rent to FCI, IFFCO, NAFED, Central Warehousing Corporation, etc. The same had been furnished during the course of the assessment proceedings as well as appellate proceedings before the Worthy CIT(A), but seem to have been overlooked. The copy of these lease deeds clearly 6 ITA Nos.1611 to 1613/Chd/2018 A.Ys.2012-13, 2014-15 & 2015-16 establishes the fact of the appellant having leased out its godowns to FCI etc. wherefrom it was deriving rental income. Further, the fact that appellant's godowns had actually been rented out to various parties also stand corroborated from Form 26AS filed by the appellant which clearly reflects that tax had been deducted at source in respect of the rental income received by the appellant..During the year under consideration, the appellant has shown total warehousing turnover of Rs.81.56 crores which includes income on account of storage as well as rental income. Out of this amount Rs.34.97 crores was received as rental income from IFFCO, NAFED, Central Warehousing Corporation, etc. The appellant has excluded proportionate expenditure incurred in relation to this rental income. Accordingly, the profit on rental income after excluding the proportionate expenditure of Rs.26.28 crores has been computed and claimed for working out eligible deduction. On perusal of details of such calculation where the deduction has been claimed only on account of rental income excluding the income received on account of storage charges, I f ind th at the appell an t h as righ tl y cl aimed the eligible deduction of Rs.8,69,01,552/- u/s 80P(2)(e). On similar facts, in the appellant's case for the A.Y.2013-14 the CIT(Appeals) had allowed deduction claimed u/s 80P(2)(e) vide his order dated 30.09.2016 which has been upheld by the Hon'ble Tribunal/In the light of the above facts and circumstances, I hold that the AO was not justified in making disallowance of the deduction claimed on account of rental income and the same is ordered to be deleted."
5. Ag gr i e ve d b y t he s a me , the Re ven ue h a s c ome up i n a pp e a l be fo re u s.
6. A t t he out se t i tse lf Ld .C oun s e l f or t he a ss e ssee p oi nte d out th a t the I TA T ha d he ld de du ction u /s 80 P ( 2) ( e ) a l l ow a ble on th e re nta l inco me e a r ne d f rom ou tsi d e r s ,i n t he ca se of the a sse ssee it sel f i n s ub se q ue n t a sse ssme nt ye a r i . e . A .Y. 20 1 3 -1 4 and a Mi sce ll a n e ous a pp l i ca ti on f il e d by t he 7 ITA Nos.1611 to 1613/Chd/2018 A.Ys.2012-13, 2014-15 & 2015-16 Re ve nue a ga in st th e or de r pa s se d b y th e I TA T h a d a l so b e en di smi ss e d h ol di n g n o e r r or / mi st a k e i n t he sa me . C o py of the or de r of the I TA T i n I TA no . 1 2 6 9& 12 2 3 /C h d /1 6 d a te d 22 -0 1 -1 8 , a nd M . A N o.1 5 8 & 1 5 9/C hd /1 8 d a te d 0 8 -0 3- 1 9 , bot h r e l a ti ng to A. Y 2 0 1 3-1 4 , w e re f ile d be fo re u s.
7. B e f ore u s, the Ld . D R th oug h re lie d u p on the or de r of the A. O. , w a s fa ir e nou gh to conc e de t ha t the i ssu e w a s cove re d in fa v our of t he a s se s se e in vi e w of th e d e c is io n of the H on 'b le Ju ri sd i cti on a l H ig h C ou rt i n th e c ase of the a sse sse e i tse l f and t he de ci si on of th e I . T. A. T. i n th e c a se of the a s se s se e f or sub s e q ue nt ye a r .
8. I n v ie w o f the ab ove we f i nd no r e a son t o in te r fer e in the o rde r of the Ld . C I T( A) a ll ow i ng th e a ss e s se s c l a im of de du cti on u /s 8 0P ( 2 )( e ) a moun ti ng to Rs .8 , 69 , 0 1 , 5 52 /-. The Ld. C I T( A) a l l ow e d th e a sse ssee ' s c la i m u /s 80 P ( 2) ( e ) of the Act not in g th a t t he Ho n'b le Ju r is di ct ion a l H ig h C ou r t i n the ca se of a sse ssee itse l f ha d he ld th a t th e de du cti on u/s 80 P ( 2) ( d ) of th e Ac t w a s a l l ow a b le on re nt a l in come e a r ne d fr om ou tsi d e r s. I t w a s on a p p re cia ti n g th is l e ga l pr op osi ti on tha t th e I . T.A . T. i n th e f ir st r ou nd ha s re stor e d th e ma tte r ba c k to t he Ld .C I T(A ) to a d j ud i ca te the i ss ue of a llow a n ce of cl a im u /s 8 0 P( 2 ) ( e ) of the A ct a f te r ve r i fy in g the e vi de nces 8 ITA Nos.1611 to 1613/Chd/2018 A.Ys.2012-13, 2014-15 & 2015-16 fi le d by the a sse ssee . F ur the r , w e fi nd th a t th e Ld . C I T( A) ha s gon e thr ou gh a l l the e v i de nce s fi le d b y the a sse s se e a n d fou nd th e c la i m of the a ss e ssee to b e i n a c cor d a nc e w i th la w . Th e Ld . D R ha s b ee n u na b le to con tr ove r t thi s f a ctu a l fi nd i ng of th e Ld .C I T( A) . I n vi ew of th e sa me , w e f in d no re a son t o i n te r fer e in t he or de r of th e Ld. C I T( A ).
Th e a p p e a l of th e Re ve nue is t he re fo re d i smi ss e d . ITA No.1612/Chd/2018:
9. Ground No.1 raised by the Revenue reads as under:
"1. Whether on the facts and circumstances of the case the Ld. CIT(A)has erred in allowing the appeal of the assessee and delete the addition of Rs.8,33,69,176/- u/s 80P(2)(e) which is not correct because the same is not allowable to the assessee in the A. Y. 2014-15."
It was common ground between the parties that the ground No.1 raised in this appeal is similar to ground No.1 raised in I TA No.1611/Chd/2018.Our decision rendered therein at para 8 will apply mutatis mutandis to this ground also. Following the same we dismiss this ground raised by the Revenue.
10. Ground Nos.2 and 3 raised by the Revenue relate to the same issue of disallowance of interest expenses 9 ITA Nos.1611 to 1613/Chd/2018 A.Ys.2012-13, 2014-15 & 2015-16 and administrative expenses incurred in relation to the dividend and interest income earned by the assessee which were eligible for deduction u/s 80P(2)(d) of the Act and the same read as under:
"2. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was right in law in holding that the disallowance made on account of interest as per Rule 8d(2)(ii) of the Income Tax Rules, 1962 be deleted?
3. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was right in law in holding that the expenditure to be disallowed as per Rule 8D(2)(ii) of the Income Tax Rules, 1962 is to be calculated by taking into consideration only those investment which have earned income during the year in completed disregard to CBDT Circular No. 5/2014 dated 11.02.2014, which clarifies that Rule 8D read with section 14A of the Act provides for disallowance of the expenditure even where tax payer in a particular year has not earned any exempt income?"
11. B r i e f f a c t s r e l a t i n g t o t h e i s s u e a r e t h a t d ur i ng the a sse ss me nt pr oc ee d i n gs th e A .O . n ote d tha t the de du cti on s u/s 8 0 P (2 ) ( d) of th e Ac t a moun ti ng to Rs. 8, 1 2 ,6 5 ,8 6 0 /- on d i vi de nd i n come a n d Rs. 2 0, 4 4,1 7 8 /- on in te re st i nc ome w e re cl a i me d b y th e a sse s see . Th e A .O . obs e r ve d tha t d iv id e n d w a s r e ce i ve d by th e a ss e ssee on sha re s he l d w i th I F FC O , I n d ia n Pot a sh Ltd ., KR I B H C O , C WC wh i ch w e re th e N a t io na l A pe x C o op . S oc ie tie s a nd t he a sse sse e w a s a s ha r e hol de r i n s uch so ci e tie s . Th e fu nd s pl a ce d in th e a bov e i nve st me nt s w e re out of t he bu si ne ss 10 ITA Nos.1611 to 1613/Chd/2018 A.Ys.2012-13, 2014-15 & 2015-16 fi r ms of the a ss e ssee . Th e se in ve stme n ts we re p a r t a n d pa r c e l of ca r r yi ng on t he b us ine ss a cti vi ty of the a s se s se e . Ou t o f the s a me c om mon f un ds , in cl u di n g i n te r es t b e a r i ng fu nd s, pu r ch a ses w e re ma de , exp e nse s we re m e t a n d t he in ve s tme n ts i n sh a r e s we re ma d e . Th e a sse s see cl a ime d 10 0 % d e du cti on w i tho ut re d uctio n of a ny p ropo rt ion a te e xpe n d itu re . Th e a sse ssee 's p le a th a t no co st w a s in cu r re d on the se i nve stme nt s w a s n ot a cc e p te d b y th e A O w ho a ccor d i ng ly d isa l lo we d the c la i m R s. 8, 3 3 ,1 0 , 0 3 8 /- u /s 80 P ( 2) ( d ) of the A ct by re du ci ng t he re fr om e x pe nses in cu rr e d for e a rni n g th e s a me ca lc ul a te d by a p ply in g t he pr ov is io ns of s e ct io n 14 A of t he Act.
12 . Th e Ld . C I T( A) h e l d th a t the A .O . ha d r ig htl y a p pl i ed t he pr ov is io ns of sec ti on 1 4 A of th e Ac t fo r the pur p ose of de te r mi ni n g the e xpe n se s w hi ch a r e to be re d u ced f r om the in te re st a n d d i vi de nd i n come e a rn e d b y the a sse ssee e l i gi ble for d e d uc tio n u/s 8 0 P (2 ) ( d) of th e Ac t, b ut the Ld . C I T( A) fu rt he r he l d th a t si nc e the in te re st e x pe ns e s and a dmi n is tr a ti ve e xp e nse s we re to b e c omp ute d i n a cco rd a n ce wi th Ru l e 8 D of the I n come Ta x R ul e s , 1 9 6 2 a n d con si d e r i ng the fa c t t ha t the a sse s see ha d suf f ic ie nt ow n in te re s t f ree fu nd s, no d is a l low a n ce of in te re st u /s 14 A w a s t o be ma d e 11 ITA Nos.1611 to 1613/Chd/2018 A.Ys.2012-13, 2014-15 & 2015-16 as per Ru le 8D of the R ule s. As f or the pur p ose of di sa l l ow a nc e of a d mi ni str a t iv e exp e n se s, the Ld .C I T(A ) h e l d tha t t he sa me w a s to b e ca l cu la te d b y a p pl yi n g th e f or mul a pr e scr i be d u nde r Ru le 8 D (2 ) ( ii i ) of th e Rule s o n onl y th ose in ve s tme n ts w hi ch h a d e a rne d in te re st a nd d i vi de nd i nc ome . Th e Ld . C I T( A) r e l ie d u p on t he de ci si on of t he I . T. A . T. i n t he ca se of th e a sse ss ee i tse lf f or a s se s sme n t ye a r s 2 012 -1 3 a n d 20 1 3 -1 4 in t hi s r e ga r d . R e le va n t fi nd i ng s of t he Ld . C I T( A ) a t pa r a 6 to 6 .4 of th e or de r a re a s und e r :
"6. I have gone through the facts of the case and written submission filed by the appellant. It is observed that the issue in the present appeal is whether disallowance u/s 14A r.w.r. 8D is called for in the case of the appellant claiming deduction under section 80(P)(2)(d) of the Act, and if so how the said disallowance is to be worked out as per provisions of rule 8D of the income Tax rules. I find that the provisions of section 14A of the Act are attracted in the case of the appellant as it falls on all fours on the judgment of Hon'ble jurisdictional High Court of Punjab & Haryana in the case of Punjab State Cooperative Milk Producers Federation Ltd. Vs. CIT [2016] 67 taxmann.com 27 where the Hon'ble High Court held that provisions of section 14A are applicable even to income claimed as deduction u/s 80P(2)(d) of the Act. Moreover, the applicability of section 14A r.w.r. 8D has been upheld in the case of the assessee by the tribunal in the preceding years. The relevant part of the order of the honourable tribunal in ITA No.48/chd/2016 for the A.Y.2012-13 as below:
"9. On the first contention raised by the assessee that section 14A r.w.r. 8D is not applicable while working out the claim of deduction u/s 80P(2)(d), we find that the Ld. DR has rightly pointed out that the issue has already been dealt with by the honourable jurisdictional High Court in the case of Punjab State 12 ITA Nos.1611 to 1613/Chd/2018 A.Ys.2012-13, 2014-15 & 2015-16 Cooperative Milk Producers Federation Ltd. vs Commissioner of Income Tax & Anr. reported in 336 ITR 495 wherein the applicability of the said section has been upheld.
10. Moreover, as emerged during the course of hearing before us, the applicability of rule 8D r.w.s. 14A has been upheld in the case of the assessee by the tribunal and accepted by the assessee in preceding years. Therefore, we find no merit in the contention of the assessee that section 14A r.w.r. 8D is not to be applied for the purpose of calculating the deduction allowable u/s 80P(2)(d) of the Act."
Since the facts remain the same, I am of the view that since the assessee is in receipt of income which is not chargeable to tax, the expenditure incurred in relation to earning of the said income has to be disallowed under section 14A r.w.r. 8D. Therefore, the contention of the appellant that section 14A is not applicable to the appellant is without merit. 6.1 Since the issue of applicability of disallowance u/s!4A r.w.r. 8D has been the assessee, the issue which remains is to decide the quantum of the disallowance to be made. I find that the counsel of the appellant has rightly pointed out that the AO has made the disallowance on certain assumptions and not followed the provisions of rule 8D while calculating the applicable disallowance in the case of the appellant. It has been decided by the honourable ITAT in the appellant's own cases for the preceding years that that disallowance under section 14A has to be made in accordance with the provisions of rule 8D. Therefore, I hold that the quantum of disallowance has to be reworked by the AO. It is further noted that the disallowance of rule 8D consists of two kinds of expenditure that has been incurred by the appellant in relation to earning of the exempt income. Section 8D(2)(ii) relates to the interest expenditure incurred by the appellant on the amount of investment on account of use of mixed funds of the appellant, some of which bear interest. I find that this issue has been decided by the honourable Tribunal in ITA No.48/CHD/2016 for the A.Y.2012-13 in the assessee's own case as below:
"11. As far the contention of the learned counsel for assessee that in view of the fact that it had enough surplus funds which are interest-free and which is 13 ITA Nos.1611 to 1613/Chd/2018 A.Ys.2012-13, 2014-15 & 2015-16 demonstrated from the quantum of share capital and reserves available with the assessee over the years as reflected in the financial statement of the assessee, the presumption ought to be that the investments had been made out of these interest-free funds available, we are in agreement with the learned counsel for assessee/The fact that the assessee had enough own funds to make the impugned investment had not been controverted by the learned DR and the same stands reflected in the Balance Sheet of the assessee right from financial year ending 31.03.91 to the impugned financial year ending on 31.03.12, which have been filed before us in the form of paper book. Moreover, the honourable jurisdictional High Court has held in the case of CIT vs M/s Max India Ltd. in ITA No.210/chd/2013 dated 08.03.2017 that if an assessee establishes that its interest-free funds were equal to or more than the interest-bearing funds it would be open to it to contend that presumption arises that the expenditure for earning interest income was incurred from out of its interest-free funds warranting no disallowance of interest expenditure u/s 14A r.w.r. 8D. The relevant findings of the honourable High Court are as under:
"9. This presumption is unfounded. Merely because the interest-free funds with the assessee have decreased during any period, it does not follow that the funds borrowed on interest were utilised for the purpose of investing in assets yielding exempt income. If even after the decrease the ssessee has interest-free funds sufficient to make the investment in assets yielding the exempt income, the presumption that it was such funds that were utilised for the said investment remains. There is no reason for it not to. The basis of the presumption as we will elaborate later is that an assessee would invest its funds to its advantage. It gains nothing by 'investing interest-free funds towards other assets merely on account of the interest-free funds having decreased. In that event so long as even after the decrease thereof there are sufficient interest-free funds the presumption that they would be first used to invest in assets yielding exempt income applies with equal force. "14 ITA Nos.1611 to 1613/Chd/2018
A.Ys.2012-13, 2014-15 & 2015-16
12. In view of the same, we hold that the disallowance made on account of interest expenditure as per rule 8D(2)(ii) of the Rules be deleted." 6.2 The above reasoning was also followed by the honourable ITAT in the case of the appellant for the A.Y. 2013-14 in ITA No.l269&1223/CHD/2016 dated 22.01.2018. Respectfully following the same, it is held that disallowance under rule 8D(2)(ii) is riot warranted as the assessee had sufficient own interest-free funds for making the investments which have earned income not chargeable to tax. This fact is evidenced by the balance sheet as on 31.03.2013. filed by the appellant wherein reserves and surplus of Rs.7,64,46,89,346/- are available with the appellant whereas investment stand at Rs. 1,37,55,78,246/-. In view of the above, while working out the disallowance u/s 14A r.w.r. 8D, the AO shall not make any disallowance as per section 8D(2)(ii).
6.3 The second leg of rule 8D i.e. 8D(2)(iii) relates to the administrative expenses incurred by the appellant on the management of investment. I find that this issue has been decided by the honourable tribunal in ITA No.48/CHD/2016 for the A.Y.2012-13 in the assessee's own case as below:
"13. As far as the contention of learned counsel for assessee that the calculation of administrative expenses to be disallowed as per rule 8D(2)(iii) be restricted to investments which have earned income during the year, we find merit in this contention of learned counsel for assessee. The special bench of the ITAT in the case ofACIT vs. Vireet Investments Private Limited in ITA No.502/del/2012 dated 16.06.2017 has laid down the said proposition and even the Hon'ble Delhi High Court in the case ofACB India Ltd. vs ACIT in ITA No.615/2014 dated 24.03.2015 has held so holding as under:
"4. The AO, instead of adopting the average value of investment of which income is not part of the total income i. e. the value of tax-exempt investment, chose to factor in the total investment itself. Even though the CIT(Appeals) noticed the exact value of the investment which yielded taxable income, he did not correct the error but chose to. apply his own equity. Given (he record 15 ITA Nos.1611 to 1613/Chd/2018 A.Ys.2012-13, 2014-15 & 2015-16 thai had to be done so to substitute the figure of 38,61,09,2877- with the figure of 3,53,26,800/- and thereafter arrive at the exact disallowance of 0.5%."
14. In view of the above, we direct that the expenses to be disallowed under rule 8D(2)(iii) be calculated by taking into account only those investments which have earned income during the year.
15.. In view of the above we hold that section 14A r.w.r. 8D is applicable for working out the deduction claimed u/s 80P(2)(d) by the assesses and that no disallowance of interest expenditure is allowable as per rule 8D(2)(ii) while the expenditure to be disallowed as per rule 8D(2)(iii) is to be calculated by taking into consideration only those investments which have earned income during the year.
6.4 The above reasoning was also followed by the honourable ITAT in the case of the appellant for the A.Y. 2013-14 in ITA No No.l269&1223/CHD/2016 dated 22.01.2018. Respectfully following the same, it is held that disallowance under rule 8D(2)(iii) is to be calculated by taking into account only those investments which have earned income during the year.
13 . B e f ore u s t he Ld. D R th oug h h e a v il y re lie d u p on t he or de r o f th e A .O ., f a ir l y co nc e d e d th a t b oth t he is sue s we re cove re d i n fa v our of the a sse s see b y t he or de r of the I . T.A . T. in t he p re ce d in g ye a r s .
14 . Th e Ld .C oun se l f or th e a sss e ssee h e a vi l y s up p or ted t he or de r of t he CI T( A ).
16 ITA Nos.1611 to 1613/Chd/2018
A.Ys.2012-13, 2014-15 & 2015-16 15 . H a vi ng h e a r d b oth th e pa r ti e s a n d h a vi ng gon e thr ou gh the or de r of t he C I T( A) w e f in d no r e a son to i nte rfe re i n the sa me . The Ld .C I T( A ) ha s d e l e te d the d i sa l low a n ce of i nte r e st e xpe n d itu re ca l cu l a te d a s pe r Rule 8D ( 2 )( ii) of t he R ule s by fol l ow in g th e p r op osi ti on l a i d d ow n by the I . T. A. T. i n t he ca se of the a sse ssee i tse l f fo r a sse ss me nt ye a r 2 01 2 -1 3 tha t wh e re s uf fi cie n t ow n in te re st f re e f un ds a re a va i l abl e , no di sa l l ow a nc e of i nte re st is w a r ra nte d. Th e Ld .C I T(A ) ha s giv e n a f a ctu a l f in d in g tha t s uf fi ci e n t in te re st fre e fu nd s we re a va i l a b le with th e a sse s see . Th e Ld . D R w a s u na b l e to di st in gu is h t he d e ci si on of the I . T. A. T. r e l i e d upon b y t he Ld. C I T( A) a n d w a s a l so u na b l e to con tr ove r t the f a ctu al fi nd i ng of t he C I T( A) vi s-à - vi s th e de le t ion of in te re st e xpe n se s a s p e r R ul e 8 D (2 ) ( ii ) of t he R ul e s. As f a r t he di r e c tio ns of the Ld .C I T( A ) to c a l cul a te the d is a llow a n ce of a dmi n is tr a ti ve exp e n se s a s pe r Rul e 8D ( 2 )( i ii ) of th e R ule s by ta k i ng in to cons i de r a tio n on ly th os e i nve s tmen ts w h i ch ha d e a r ne d in te re st a nd di v ide n d i nc ome , w e f in d th a t t he Ld. C I T( A) h a d r e li e d u po n the de ci si on o f the I . T. A . T. i n t he ca se of t he a s ses see i tse l f for a ss e ss me n t ye a r 20 1 3 -1 4 on id e n ti ca l i ssue . Th e Ld . D R wa s un a b l e to di st in gu is h t he sa me . I n vie w of th e sa me , we d o n ot f i nd a ny r e a so n to in te r fe re i n the or d e r of the CI T( A) i n th is r e ga r d a l so . The 17 ITA Nos.1611 to 1613/Chd/2018 A.Ys.2012-13, 2014-15 & 2015-16 gr oun d s o f a p pe a l N os. 2 a n d 3 ra i se d by the Re ve n ue a re , the re fo re , d is mis se d .
I n e ffe c t the a p pe a l o f the Re ve nue is d i smi ss e d . ITA No.1613/Chd/2018:
16. Ground No.1 raised by the Revenue reads as under:
"1. Whether on the facts and circumstances of the case the Ld. CIT(A)has erred in allowing the appeal of the assessee and delete the addition of Rs.663,26,502/- u/s 80P(2)(e) which is not correct because the same is not allowable to the assessee in the A. Y. 2015-16."
17. It was common ground between the parties that the ground No.1 raised in this appeal is similar to ground No.1 raised in I TA No.1611/Chd/2018.Our decision rendered therein at para 8 will apply mutatis mutandis to this ground also following which we dismiss the ground raised by the Revenue.
18 . G r oun d N os .2 a nd 3 r a i se d b y t he Re ve n ue re ad a s un de r :
"2. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was right in law in holding that the disallowance made on account of interest as per Rule 8d(2)(ii) of the Income Tax Rules, 1962 be deleted?18 ITA Nos.1611 to 1613/Chd/2018
A.Ys.2012-13, 2014-15 & 2015-16
3. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was right in law in holding that the expenditure to be disallowed as per Rule 8D(2)(ii) of the Income Tax Rules, 1962 is to be calculated by taking into consideration only those investment which have earned income during the year in completed disregard to CBDT Circular No. 5/2014 dated 11.02.2014, which clarifies that Rule 8D read with section 14A of the Act provides for disallowance of the expenditure even where tax payer in a particular year has not earned any exempt income?"
19 . It was common ground between both the parties that the ground Nos.2 and 3 raised in this appeal were similar to ground Nos.2 and 3 raised in ITA No.1612/Chd/2018.Our decision rendered therein at para 15 will apply mutatis mutandis to this ground also following which we dismiss both the grounds raised by the Revenue.
I n e ffe c t the a p pe a l o f the Re ve nue is d i smi ss e d . 20 . I n the re su lt, a ll th e a ppe a ls f i le d b y the Re ve n ue are di smi ss e d .
O r de r p r o n o u n ce d i n t he O p e n C ou r t .
Sd/- Sd/-
संजय गग अ नपण
ू ा ग'ु ता
(SANJAY GARG) (ANNAPURNA GUPTA)
याय क सद य/Judicial Member लेखा सद य/Accountant Member
+दनांक /Dated: 21st June, 2019
*रती*
19 ITA Nos.1611 to 1613/Chd/2018
A.Ys.2012-13, 2014-15 & 2015-16
आदे श क ( त)ल*प अ+े*षत/ Copy of the order forwarded to :
1. अपीलाथ,/ The Appellant
2. (-यथ,/ The Respondent
3. आयकर आय.
ु त/ CIT
4. आयकर आयु.त (अपील)/ The CIT(A)
5. *वभागीय ( त न1ध, आयकर अपील"य आ1धकरण, च3डीगढ़/ DR, ITAT, CHANDIGARH
6. गाड फाईल/ Guard File आदे शानस ु ार/ By order, सहायक पंजीकार/ Assistant Registrar