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Deputy Commissioner of Income Tax -2(2), R.No.545, Aayakar Bhavan, M.K. Road, Mumbai - 400020 Vs. M/s. Jigyasa Properties Pvt. Ltd., Office No.9, 3rd Floor, 7/10, Botawala Building,Mumbai - 400023
June, 27th 2014
                         MUMBAI BENCH "J", MUMBAI


                                   ITA No.2283/M/2013
                                 Assessment Year: 2009-10

           Deputy    Commissioner       of       M/s. Jigyasa Properties Pvt.
           Income Tax -2(2),                     Ltd.,
           R.No.545,                             Office No.9, 3rd Floor,
           Aayakar Bhavan,                   Vs. 7/10, Botawala Building,
           M.K. Road,                            Horniman Circle,
           Mumbai - 400020                       Fort,
                                                 Mumbai - 400023
                                                 PAN: AABCJ8722G
                (Appellant)                         (Respondent)

                                   CO No.121/M/2014
                          (Arising out of ITA No.2283/M/2013)
                                Assessment Year: 2009-10

           M/s. Jigyasa Properties Pvt.       Deputy    Commissioner       of
           Ltd.,                              Income Tax -2(2),
           Office No.104, 1st Floor,          R.No.545,
           Rajshila Building,                 Aayakar Bhavan,
           597, J.S.S. Road, Chira Bazar,     M.K. Road,
           Mumbai ­ 400 002                   Mumbai - 400020
           PAN: AABCJ8722G
                 (Appellant)                     (Respondent)

         Assessee by                 : Shri Sunil Hirawat, A.R.
         Revenue by                  : Shri Jeevanlal Lavidiya, D.R.

         Date of Hearing             : 24.06.2014
         Date of Pronouncement       : 24.06.2014


Per Sanjay Garg, Judicial Member:

         The present appeal by the Revenue and the cross objection by the
assessee have been directed against the order of the Commissioner of Income
Tax (Appeals) [(hereinafter referred to as CIT(A)] dated 21.12.12 relevant to
assessment year 2009-10 and the same are being disposed of with this common
                                        2            ITA No.2283/M/2013 & CO No.121/M/2014
                                                     M/s. Jigyasa Properties Pvt. Ltd.

      The Revenue through its grounds of appeal has agitated the action of the
ld. CIT(A) in restricting the disallowance of the expenditure to Rs.6,94,116/-
under rule 8D(2)(iii) and deleting the disallowance of Rs.46,64,760/- which
was made by the Assessing Officer (hereinafter referred to as the AO) under
rule 8D(2)(ii).

2.    The brief facts of the case are that during assessment proceedings the
AO noticed that the assessee had made investments for earning exempt
income.    He therefore, applying rule 8D, disallowed an expenditure of
Rs.53,58,877/- under section 14A of the Act as the expenditure attributable for
earning the tax free income.

3.    In appeal, the ld. CIT(A) observed from the balance sheet that the
assessee had sufficient share capital and reserves and surplus which were more
than the investments made.       The ld. CIT(A) thereafter relying upon the
decision of the Hon'ble Bombay High Court in the case of "CIT vs. Reliance
Utilities and Power Ltd." 2009 313 ITR 340 (Bom) deleted the disallowance
made by the AO under clause (ii) of rule 8D(2). However, he sustained the
disallowance at the rate of 0.5% of the average value of investment on account
of administrative expenses under rule 8D(2)(iii).       The Revenue is thus in
appeal against the deletion of the disallowance under rule 8D(2)(ii) whereas
the assessee has filed cross objections agitating the sustenance of the
disallowance by the ld. CIT(A) under rule 8D(2)(iii).

4.    We have heard the ld. representatives of both the parties and have also
gone through the records. It may be observed that the Hon'ble Bombay High
Court in the case of "CIT vs. Reliance Utilities and Power Ltd." (supra) has
held that if there are funds available, both interest free and overdraft/loans
taken, then presumption would arise that investments would be out of the
interest free fund generated or available with the assessee.
                                          3           ITA No.2283/M/2013 & CO No.121/M/2014
                                                      M/s. Jigyasa Properties Pvt. Ltd.

5.       We may observe from the order of the ld. CIT(A) that he, after going
through the balance sheet of the current year, has categorically observed that
the assessee's own funds/interest free funds were more than the investments
made and therefore he deleted the disallowance made by the AO. In our view,
the finding of fact given by the ld. CIT(A) after going through the accounts of
the assessee and thereafter deleting the disallowance in the light of the decision
of the Hon'ble Bombay High Court in the case of "CIT vs. Reliance Utilities
and Power Ltd." (supra) was correct and does not require any interference by

6.       So far the cross objection of the assessee regarding sustaining of the
disallowance made/confirmed by the ld. CIT(A) under rule 8D(2)(iii) is
concerned, the ld. A.R. could not bring before us any convincing reason to
show that the said disallowance was not required to be made in this case. The
disallowance under section 14A read with rule 8D(2)(iii) on account of
administrative expenses, in our view, has been correctly made/confirmed by
the ld. CIT(A). Accordingly, we do not find any reason to interfere with the
well reasoned order of the ld. CIT(A).

7.       In the result, the appeal of the Revenue as well as cross objection of the
assessee are therefore dismissed.

                  Order pronounced in the open court on 24.06.2014.

          Sd/-                                               Sd/-
  (D. Karunakara Rao)                                   (Sanjay Garg)
ACCOUNTANT MEMBER                                   JUDICIAL MEMBER

Mumbai, Dated: 24.06.2014.
* Kishore, Sr. P.S.
                                            4              ITA No.2283/M/2013 & CO No.121/M/2014
                                                           M/s. Jigyasa Properties Pvt. Ltd.

Copy to: The Appellant
        The Respondent
        The CIT, Concerned, Mumbai
        The CIT (A) Concerned, Mumbai
        The DR "C" Bench
//True Copy//                           [

                                                By Order

                              Dy/Asstt. Registrar, ITAT, Mumbai.
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