The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has granted exemption to ICICI Bank as books of accounts prepared under Section 115JB read with Section 211(2) of the Companies Act are not applicable to it.
In this appeal the assessee had prayed that provisions of Section 115JB of the Income Tax Act were not applicable to the assessee as the books of account were prepared as per the provisions of Banking Regulation Act read with provisions of 211(2) of the Companies Act, 1956.
While dealing with the appeal the Bench observed that the grounds raised by the assessee was related to the ground raised by the revenue in its cross appeal which was related to disallowance of expenditure under Section 14A of the Income Tax Act for earning income exempt from tax.
Aarti Visanji,for the assessee submitted that the assessee was exempted from preparing its accounts as per Part-II & Part III of Schedule -VI of the Companies Act.
P.C. Chhotaray, on behalf of the revenue, submitted that the Apex Court in the case of Maxopp Investments Ltd. vs. CIT, had held that the doctrine of apportionment would apply in respect of interest expenditure. He vehemently argued that the interest expenditure should be apportioned and disallowance should be made to the extent of apportionment of borrowed funds were utilised for earning exempt income.
He further contended that for the purpose of ascertaining the fund position available for investment, the date of investment had to be assigned and not the date of balance sheet.
The two-member Bench of Vikas Awasthy, (Judicial Member) and Amarjit Singh, (Accountant Member) allowed the appeal filed by the assessee observing that corresponding grounds were also raised in the cross appeal filed by the revenue in which the court held that,
“As far as disallowance of interest expenditure for computing net exempt income is concerned, we are of the view that if the investment made in exempt income yielding assets are made out of interest free funds available with the assessee, there cannot be any disallowance of interest expenditure. As per facts and material on record, surplus interest free funds available with the assessee far exceeds the investment made in tax free interest income yielding assets, therefore, no disallowance of interest expenditure can be made.”
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