Apcotex Industries Limited Vs ACIT (ITAT Mumbai)
Suo-Motu 14A Accepted – Own Funds Exceed Investments— Further Disallowance Unsustainable
Assessee challenged disallowance u/s 14A amounting to Rs.40,20,144/-. In the return of income, Assessee had already made suo-motu disallowance of Rs.10,21,200/- being 0.5% of the average value of investments. Assessee earned dividend income of Rs.56,31,238/- during the year. AO, however, held that interest expenditure of Rs.3.98 crore was relatable to investments & proceeded to enhance the disallowance.
Before Tribunal, Ld. AR demonstrated from audited balance sheet that Assessee’s net worth stood at Rs.69.77 crore as on 31/03/2012 & Rs.64.19 crore as on 31/03/2011—far exceeding the investments of Rs.21.40 crore as on 31/03/2012. It was thus established that investments were fully backed by own funds. Tribunal relied on binding Bombay High Court rulings in CIT Vs HDFC Bank Ltd (366 ITR 505) & CIT Vs Reliance Utilities & Power Ltd (313 ITR 340), holding that where interest-free funds exceed investments, a presumption arises that investments are made from such own funds.
Tribunal held that no interest expenditure could be attributed to exempt-income-yielding investments. The suo-motu disallowance already made was reasonable. Disallowance made by AO u/s 14A was therefore deleted in full.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
