GRUH FINANCE LTD.,AHMEDABAD V. THE DY. CIT, CIRCLE-2(1)(1), AHMEDABAD

ITA 2338/AHD/2017

AI Insights

Gruh Finance Ltd. appealed against the order confirming the disallowance of Rs.1,59,29,648 under section 14A of the Income Tax Act, 1961, which was made by the Assessing Officer for the Assessment Year 2010-11. The appeal was heard by the Income Tax Appellate Tribunal in Ahmedabad. Both parties acknowledged that the issue was covered by a previous Tribunal order in the assessee's own case for AY 2008-09. The Tribunal found no change in the factual matrix or legal propositions that would warrant a different conclusion from the previous case, leading to the dismissal of the appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 24984 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Other Referred Cases: PCIT vs. India Gelatine and Chemicals Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B P SRIVASTAVA
• Assessee Lawyers: ARTI N SHAH
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD BEFORE DR.BRR KUMAR, VICE PRESIDENT SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I.T.A. No.2338/Ahd/2017 (Assessment Year: 2010-11) Gruh Finance Ltd., “GRUH” Netaji Marg, Mithakali Six Roads, Ellisbridge, Ahmedabad-380007 Vs. Deputy Commissioner of Income Tax, Circle-2(1)(1), Ahmedabad [PAN No.AAACG7010K] (Appellant) .. (Respondent) Appellant by : Ms Arti N Shah, A.R. Respondent by: Shri B P Srivastava, Sr. DR Date of Hearing 17.12.2024 Date of Pronouncement 03.01.2025 O R D E R PER: DR. BRR KUMAR, VICE PRESIDENT: This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals)-2, Ahmedabad vide order dated 15.09.2017 passed for the Assessment Year 2010-11. 2. The Assessee has taken the following grounds of appeal:- [1] The Learned Commissioner of Income Tax, (Appeals)-2, has erred in law as well as on facts of the case by confirming the disallowance of Rs.1,59,29,648/- made u/s.14A by the Assessing Officer. [2] Your appellant reserves the right to add, alter, amend and/or withdraw any of the above grounds of appeal. 3. At the outset, both the parties fairly submitted that the issue taken up by the assessee in the appeal before us has been stands ITA No. 2338/Ahd/2017 Gruh Finance Ltd. vs. DCIT Asst.Year –2010-11 - 2– covered by the order of the Tribunal in the assessee’s own case in ITA Nos.1880/Ahd/2015 for AY 2008-09 dated 30.09.2016. For the sake of ready reference, the operative portion of this order is reproduced as under: ‘’…7. We have heard both the parties. There is no dispute about the relevant facts and figure involved in assessee's exempt income, tax free investments and availability of interest free funds. There is further no quarrel that the Assessing Officer had not disallowed any direct expenditure relating to exempt income. The factual position in the lower appellate proceedings is that the CIT(A) has dealt with each and every aspect of assessee's exempt income and corresponding investment to establish a direct nexus between the latter and its interest bearing funds avail from NHB. He has further arrived at a conclusion that the assessee has been maintaining separate accounts (supra). The assessee is unable to rebut this factual position. We thus find no reason to interfere in the lower appellate order so far as first two direct expenditure disallowances of Rs.1,10,75,570/- for interest bearing funds withdrawn from IDBI account and Rs.1,15,75,905/ drawn from HDFC Bank account; both invested in mutual funds are concern…” We proceed to deal with the third figure of Rs.1,02,00,589/- stated to be involving balance funds utilized in mutual funds investment. We repeat that we are dealing with a case falling under direct expenditure disallowance covered by Rule 8D (2) (i) of the Income Tax Rules. The CIT(A) has no where establish a direct link between assessee's interest bearing fund vis-a-vis its impugned tax free investment. It has further come on record that assessee's interest free funds far exceed its tax free investment. We observe in these facts that an inference as per Hon'ble jurisdictional decision (2015) 376 ITR 553 (Guj) PCIT vs. India Gelatine and Chemicals Ltd. can safely withdrawn that the impugned tax free funds have been made from non interest We thus delete this third item of disallowance. Accordingly uphold CIT(A)’s enhancement action under challenge in principle. We now come to an equally important aspect as to Whether Section 14A r.w. Rule 8D disallowance could exceed the exempt income amount or not. A coordinate bench of this tribunal as well as Delhi high court (supra) have already held that the same cannot in any case be computed beyond the exempt income amount. We thus direct the assessing authority to frame consequential ITA No. 2338/Ahd/2017 Gruh Finance Ltd. vs. DCIT Asst.Year –2010-11 - 3– computation restricting the impugned Section 14A disallowance to the extent of exempt of Rs.1,89,42,065/- only. Thus substantive ground as well as the main appeal ITA No.1880/Ahd/2015 for AY 2008-09 is partly allowed…” 4. In the absence of any change in factual matrix and legal proposition brought to our notice, the appeal of the assessee is hereby dismissed. 5. In the result, the appeal of the assessee is dismissed. This Order pronounced in Open Court on 03.01.2025 Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (DR. BRR KUMAR) JUDICIAL MEMBER VICE PRESIDENT (True Copy) Ahmedabad; Dated 03.01.2025 Manish, Sr. PS TRUE COPY आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant 2. ᮧ᭜यथᱮ / The Respondent. 3. संबंिधत आयकर आयुᲦ / Concerned CIT 4. आयकर आयुᲦ(अपील) / The CIT(A)- 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाडᭅ फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad "