Case Law Details
DCIT Vs ICICI Bank Ltd. (ITAT Mumbai)
ITAT Mumbai held that inordinate delay of nearly 15 years in filing of cross objection by the assessee without giving any valid reason and/ or plausible explanation is not condoned.
Facts- During the course of assessment, the AO noticed that assessee bank had incurred expenses of Rs 486.67 to earn dividend of ₹112.17 crore. The AO found that dividend income was only of ₹112.17 crore whereas as expenses incurred of ₹486.67 crore was incurred to earn the said exempt income. The assessing officer considered that borrowed funds of the assessee at the end of the year was Rs.59834.96 crores and assessee had paid interest of R.6376.78 crores on the borrowed funds. The assessing officer stated that since the assessee has not maintained separate accounts for each source of receipts and computed average cost @ 10.65% of Rs.485.54 crores as interest expenditure on the utilisation of funds for investing in shares. Therefore, the AO has disallowed the entire remaining expenditure of ₹374.50 crore incurred towards earning exempt income and the assessee’s claim of exempt income of Rs.112.17 crores was also rejected. CIT(A) allowed the appeal.
Notably, there was delay of 14 years and 30 days [5218 days] in filing the cross objection. Assessee has filed affidavit dated 08.01.2023 for condonation of delay of 5218 days in filing the cross objection. In the affidavit, the assessee submitted that while discussing the upcoming hearing of January 09th 2023 with the banks legal counsel, the bank was advised to consider the challenging of validity of reopening proceedings.
Conclusion- Held that if surplus interest free funds are available with the assessee to take care of the investments made in shares giving rise to dividend income, no disallowance of interest expenditure can be made. Here, the assessee was having much more interest free funds then the investment made to earn exempt income as discussed supra, we do not find any infirmity in the decision of the Ld. CIT(A). Therefore, this ground of appeal of the Revenue stand dismissed.
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