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Mr.Rajat Indulal Doshi, 1-E, 1st floor, Dil Pazir Bhulabhai Desai road, Warden Road, Mumbai-400026 Vs. The Asstt. Commissioner of Income Tax, Circle No.16(1), Matru Mandir, Mumbai-400007.
October, 09th 2015
                 ,   "" 


             ./I.T.A. No.7242 and 7243/Mum/2011
          (   / Assessment Years: 2007-08 and 2008-09)
 Mr.Rajat Indulal Doshi,  / The Asstt. Commissioner of Income
 1-E, 1 floor, Dil Pazir   Vs.
                                Tax, Circle No.16(1),
 Bhulabhai Desai road,          Matru Mandir,
 Warden Road,
       ( /Appellant)             ..     ( / Respondent)

        ./   ./PAN. :AABPD9790M

            / Appellant by              Shri Bhupendra Shah
            /Revenue by                 Shri S K Mishra

            / Date of Hearing
                                            : 8.9.2015
           /Date of Pronouncement: 7.10.2015

                              / O R D E R
Per B R Baskaran, AM:

       Both the appeals filed by the assessee are directed against the
separate orders passed by Ld CIT(A)-27, Mumbai for assessment years
2007-08 and 2008-09. Both the appeals were heard together and hence
they are being disposed of by this common order, for the sake of

2.     The solitary issue urged in both the appeals relate to the
disallowance made u/s 14A of the Act.

3.     The facts are that assessee is an individual and has earned
exempted income in the form of dividend and long term capital gains. The
AO computed the disallowance in both the years u/s 14A of the Act by
                                               I T A N o . 7 2 4 2 a n d 7 2 4 3 / Mu m / 2 0 1 1

applying Rule 8D of IT rules. In the appellate proceedings, the Ld CIT(A)
held that the provisions of Rule 8D shall not apply to AY 2007-08.
However, he directed the AO to compute the interest disallowance in
proportion to loan funds to total funds.    In AY 2008-09, he upheld the
disallowance made by the AO.

4.    The contention of the assessee before us is that the assessee is
possessing sufficient interest free funds to cover the investments and
hence there is no requirement to make any disallowance out of interest
expenditure as per the decision of the Hon'ble jurisdictional Mumbai High
Court in the case of Reliance Utilities and power ltd (331 ITR 340). The Ld
A.R also placed reliance on the decision rendered in the case of Hero
Cycles (323 ITR 518).

5.    On the contrary, the Ld D.R submitted that the assessee has not
established one to one nexus between the interest bearing funds and the
investments made.

6.    We have heard rival contentions and perused the record. There is
no dispute with regard to the fact that the provisions of Rule 8D shall not
be applicable for AY 2007-08 in view of the decision of Hon'ble
jurisdictional High Court in the case of Godrej & Boyce Mfg. Co. Ltd (328
ITR 81). However, it is submitted that the Ld CIT(A) has followed the
same methodology as prescribed in Rule 8D for computing the interest
disallowance for AY 2007-08.      However, the main contention of the
assessee is that there is no requirement to make any disallowance out of
interest expenditure, since the interest free funds are far in excess of the
investments made. In this regard, the assessee has placed reliance on the
decision of jurisdictional High Court in the case of Reliance Utilities and
power Ltd (supra). We notice that the tax authorities have not examined
this contention of the assessee with reference to the Balance sheet and
                                               I T A N o . 7 2 4 2 a n d 7 2 4 3 / Mu m / 2 0 1 1

funds position of the assessee.     Hence, in our view, this issue requires
fresh examination in both the years by duly considering the contentions of
the assessee cited above. Accordingly, we set aside the order passed by
Ld CIT(A) on this issue in both the years and restore them to the file of
the assessing officer with the direction to examine this issue in accordance
with the decision rendered by the jurisdictional High Court in the case of
Reliance utilities and power Ltd (supra).

7.      In the result, both the appeals filed by the assessee are treated as
allowed for statistical purposes.
        Pronounced accordingly on 7th Oct, 2015.
              7th                         Oct, 2015    

            Sd                                              sd

      (AMARJIT SINGH)                                ( B.R. BASKARAN)
     JUDICIAL MEMBER                                 ACCOUNTANT MEMBER

 Mumbai: 7th       Oct, 2015.

.../ SRL , Sr. PS

    /Copy of the Order forwarded to :
1.  / The Appellant
2.     / The Respondent.
3.      () / The CIT(A)- concerned
4.       / CIT concerned
5.     ,   ,  /
      DR, ITAT, Mumbai concerned
6.      / Guard file.

                                                                 / BY ORDER,
True copy

                                                       (Asstt. Registrar)
                                              ,  /ITAT, Mumbai
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