Principal Commissioner of Income-tax-07 v. Oriental Bank of Commerce - 2017-LL-1013-7

Citation	2017-LL-1013-7
Appellant Name	Principal Commissioner of Income-tax-07
Respondent Name	Oriental Bank of Commerce
Court	HIGH COURT OF DELHI AT NEW DELHI
Relevant Act	Income-tax
Date of Order	13/10/2017
Assessment Year	2008-09
Judgment	View Judgment
Keyword Tags	interest expenditure • interest free fund • question of law • exempted income • expenditure incurred in relation to income not includible in total income
Bot Summary:	592/2017 594/2017 Page 1 of 3 ITAT erred in concurring with the Commissioner of Income Tax CIT(A) in restricting the disallowance made by the Assessing Officer under Section 14A read with Rule 8D towards expenditure incurred in making investments that yielded exempt income. Mr Sanjay Kumar, learned Junior Standing Counsel for the Revenue has focussed on the deletion by the CIT of disallowance made by the AO of indirect interest expenditure in terms of Rule 8D(2) of the Income Tax Rules, 1962. He placed reliance on the decision of this Court in Pr. Commissioner of Income-tax, Delhi-2 v. Bharti Overseas Ltd. 2015 64 taxmann.com 340 to urge that once there was any interest expenditure incurred, the presumption of part of it having been incurred for making the investment in terms of Rule 8D(2) of the Rules stood attracted. The Court finds that in the present case, the CIT(A) has rightly commented that the AO has not, as mandated by Rule 8D of the Rules, examined the accounts of the Assessee before concluding that the claim of the Assessee that it incurred no interest expenditure for the purposes of making investments was untrue. There was no occasion for the Assessee to incur any interest expenditure for the purpose. It is this factual finding that has been concurred with by the ITAT. 5.The net result is that without complying with Rule 8D of the Rules by recording that he is not satisfied with the correctness of the Assessee s ITA Nos. 592/2017 594/2017 Page 2 of 3 assertion that no expenditure has been incurred has been incurred in relation to the exempt income , the AO could not have straightway proceeded to draw a presumption and apply Rule 8D(2) of the Rules that some interest expenditure should have been incurred by the Assessee for the purposes of making investments which yielded exempt income.

IN HIGH COURT OF DELHI AT NEW DELHI 10 & 12 ITA 592/2017 PRINCIPAL COMMISSIONER OF INCOME TAX-07 Appellant Through: Mr Sanjay Kumar, Junior Standing Counsel versus ORIENTAL BANK OF COMMERCE . Respondent Through: None ITA 594/2017 PRINCIPAL COMMISSIONER OF INCOME TAX-07 Appellant Through: Mr Sanjay Kumar, Junior Standing Counsel versus ORIENTAL BANK OF COMMERCE Respondent Through: None CORAM: JUSTICE S. MURALIDHAR JUSTICE PRATHIBA M. SINGH ORDER 13.10.2017 1. These are two appeals by Revenue against common order dated 27th December, 2016 passed by Income Tax Appellate Tribunal (ITAT) in ITA Nos. 242/Del/2014 and 243/Del/2014 for Assessment Years ( AYs ) 2008-09 and 2009-10. 2. question sought to be urged in present appeals is whether ITA Nos. 592/2017 & 594/2017 Page 1 of 3 ITAT erred in concurring with Commissioner of Income Tax (Appeals) [CIT(A)] in restricting disallowance made by Assessing Officer (AO) under Section 14A read with Rule 8D towards expenditure incurred in making investments that yielded exempt income. 3. Mr Sanjay Kumar, learned Junior Standing Counsel for Revenue has focussed on deletion by CIT (A) of disallowance made by AO of indirect interest expenditure in terms of Rule 8D(2) (ii) of Income Tax Rules, 1962 ( Rules ). He placed reliance on decision of this Court in Pr. Commissioner of Income-tax, Delhi-2 v. Bharti Overseas (P) Ltd. [2015] 64 taxmann.com 340 (Delhi) to urge that once there was any interest expenditure incurred, presumption of part of it having been incurred for making investment in terms of Rule 8D(2) (ii) of Rules stood attracted. 4. However, Court finds that in present case, CIT(A) has rightly commented that AO has not, as mandated by Rule 8D (1) of Rules, examined accounts of Assessee before concluding that claim of Assessee that it incurred no interest expenditure for purposes of making investments was untrue. On contrary, CIT(A) notes that Assessee has throughout been asserting that it had more than sufficient interest free fund for purposes of making investments. There was no occasion for Assessee to incur any interest expenditure for purpose. It is this factual finding that has been concurred with by ITAT. 5.The net result is that without complying with Rule 8D (1) of Rules by recording that he is not satisfied with correctness of Assessee s ITA Nos. 592/2017 & 594/2017 Page 2 of 3 assertion that no expenditure has been incurred has been incurred in relation to exempt income , AO could not have straightway proceeded to draw presumption and apply Rule 8D (ii)(2) of Rules that some interest expenditure should have been incurred by Assessee for purposes of making investments which yielded exempt income. 6. orders passed by CIT(A) and ITAT do not suffer from any legal infirmity. 7. No substantial question of law arises in these appeals and same are accordingly dismissed but, in circumstances, with no orders as to costs. S.MURALIDHAR, J. PRATHIBA M. SINGH, J. OCTOBER 13, 2017 rd ITA Nos. 592/2017 & 594/2017 Page 3 of 3 Principal Commissioner of Income-tax-07 v. Oriental Bank of Commerce

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