IN INCOME TAX APPELLATE TRIBUNAL BENCH, PUNE . , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM ITA No.904/PUN/2017 Assessment Year : 2012-13 Kalyani Steels Ltd., Mundhwa, Pune-411036. PAN : AAACK7315D ...Appellant V/s. ACIT, Circle-14. Pune. Respondent Assessee by : Shri Nikhil Pathak Revenue by : Shri Vishwas Mundhe Date of Hearing : 05.07.2019 Date of Pronouncement : 27.08.2019 ORDER PER D. KARUNAKARA RAO, AM: This appeal is filed by assessee against order of CIT(A)-7, Pune dated 11.11.2016 for Assessment Year 2012-13. 2. During proceedings before us, ld. Counsel for assessee filed additional ground and submitted that if said additional ground is allowed in favour of assessee, adjudication of other regular grounds becomes academic exercise only. Accordingly, said additional ground filed by assessee is extracted as under :- 1] assessee submits that investments on which no tax free income has been earned during year should be excluded for purposes of computing disallowance u/s 14A r.w.r. 8D(iii). 2 ITA No.904/PUN/2017 3. From above, it is evident that additional ground being legal ground relates to requirement of restricting disallowance u/s 14A of I.T. Act, 1961 read with Rule 8D(2) of I.T. Rules, 1962 to extent of sum of exempt income and dividend yielded investments instead of entire investments made by assessee. Considering legal nature of said additional ground, same is admitted and adjudicated in following paragraphs. 4. Briefly stated relevant facts include that assessee is company engaged in business of manufacturing and selling of Hot Metal, Pig Iron, Steel Billets, Blooms and Rolled Products and generation of power etc. assessee filed return of income declaring total income of Rs.13,91,59,547/- after claiming of deduction under Chapter VI-A of Act. At end of assessment order u/s 143(3) of Act, Assessing Officer computed total income of assessee at Rs.13,95,75,732/-. In assessment, Assessing Officer scrutinized accounts of assessee and found that assessee suo-motu disallowed sum of Rs.37,99,500/- u/s 14A r.w. Rule 8D(2)((iii) in computation. computation for said suo-motu disallowance given in para 33 of Paper Book. According to said computation, average investments was originally worked out by assessee amounts to Rs.75,98,99,970/- and 0.5% of average investment works out to Rs.37,99,500/-. Assessing Officer accepted said computation of disallowance u/s 14A r.w. Rule 8D(2)(iii) and made assessment. 3 ITA No.904/PUN/2017 5. However, during first appellate proceedings, assessee raised alternate ground stating that disallowance should be restricted only to 5,00,000/- on ad-hoc basis as done in assessee s own case in earlier assessment year 2008-09. CIT(A) rejected said alternate ground of assessee and dismissed appeal of assessee. 6. Aggrieved with said decision of CIT(A), assessee is in appeal before us with above extracted additional ground. 7. As evident from additional ground, limited prayer before us now relates to modification of average investments in light of various decisions including decision of this Tribunal in case of M/s. Quick Heal Technologies Ltd. vide ITA Nos.1500 & 1710/PUN/2017 for assessment years 2012-13 & 2014-15, order dated 12.03.2019. On this issue, ld. Counsel for assessee brought our attention to said page 33 of Paper Book and submitted that only dividend yielded investments is preference shares of Kalyani Investment Company Limited, which yielded exempt income of Rs.8,06,40,000/-. Otherwise, rest of investments in equity shares of (i) Bharat NRE Coke Limited, (ii) Kalyani Mukand Limited, (iii) Lord Ganesha Minerals Private Limited, and (iv) Hospet Steels Limited never yielded dividend. Therefore, these investments in these companies should be excluded for purposes of computing average investments of assessee. 4 ITA No.904/PUN/2017 8. On hearing both sides, we find similar issue was adjudicated by Tribunal in various decisions such as (i) Kumar Urban Development Pvt. Ltd. Vs. DCIT vide ITA No.66/PUN/2015 for assessment year 2008-09 dated 28.06.2017 and (ii) M/s. Quick Heal Technologies Ltd. (supra). For sake of completeness, we find contents of para 6 of order of Tribunal in case of M/s. Quick Heal Technologies Ltd. (supra) are relevant and same are extracted hereunder :- 6. Hon'ble Delhi High Court in ACB India Ltd. vs. CIT (2015) 374 ITR 108 (Del), has held that average value of investments, for purposes of Rule 8D(2)(iii), should be confined to those securities in respect of which exempt income is earned and not total investments. Similar view has been taken by Special Bench of Tribunal in case of ACIT vs. Vireet Investments (P) Ltd. (2017) 165 ITD 27 (Del) (SB) holding that only those investments should be considered for computing average value of investments which yield exempt income during year. In view of afore referred precedents, we set aside impugned order to this extent and remit matter to file of Assessing Officer for re-computing disallowance under Rule 8D(2)(iii) by considering only such investments in calculating average value of investments, which have yielded exempt income during year. assessee will be allowed hearing opportunity in fresh proceedings. 9. From above, it is evident that Hon ble Delhi High Court in case of ACB India Ltd. vs. CIT, 374 ITR 108 (Del) and Special Bench of ITAT in case of ACIT vs. Vireet Investments (P) Ltd., 165 ITD 27 (Del) (SB) have given categorical finding for computing average investments only to exempt income yielded investments should be considered. Therefore, following parity of reasoning, we set-aside order of CIT(A) to extent of remit matter to file of Assessing Officer for re-computing disallowance under Rule 8D(2)(iii) of Rules by considering only such investments in calculating 5 ITA No.904/PUN/2017 average value of investments, which is yielded exempt income during year. Assessing Officer shall grant reasonable opportunity of being heard to assessee in fresh proceedings. Accordingly, additional ground raised by assessee is allowed for statistical purposes. 10. Considering relief granted to assessee by way of additional ground, in our opinion, adjudication of other grounds becomes academic exercise only. Therefore, same are dismissed as academic. 11. In result, appeal of assessee is partly allowed for statistical purposes. Order pronounced on 27th day of August, 2019. Sd/- Sd/- ( VIKAS AWASTHY) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER Pune; Dated : 27th August, 2019. Sujeet Copy of Order forwarded to : 1. Appellant. 2. Respondent. 3. CIT(A)-7, Pune. 4. CCIT, Pune. 5. DR, ITAT, Bench, Pune. 6. Guard File. BY ORDER, // True Copy // Senior Private Secretary ITAT, Pune. Kalyani Steels Ltd. v. ACIT, Circle- 14, Pune