| आयकर अपीलीय अिधकरण (cid:12)ायपीठ, मुंबई | IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, HON’BLE VICE PRESIDENT &

SHRI NARENDRA KUMAR BILLAIYA, HON’BLE ACCOUNTANT MEMBER I.T.A. No. 4899/Mum/2024 Assessment Year: 2016-17 Shringar Developers Private Limited ITO, Ward – 13(2)(3), Mumbai

303, Unique Tower Vs Gaiwadi Industrial Estate Behind Petrol Pump Off S.V. Road Goregaon (W)

Mumbai - 400062 [PAN: AAJCS6868G]

अपीलाथ(cid:22)/ (Appellant) (cid:23)(cid:24) यथ(cid:22)/ (Respondent) Assessee by : Shri Yogesh Thar & Shri Deep Chauhan, A/Rs Revenue by : Shri Bhangepatil Pushkaraj Ramesh, Sr. D/R सुनवाई की तारीख/Date of Hearing : 24/02/2025 घोषणा की तारीख /Date of Pronouncement: 28/02/2025 आदेश/O R D E R PER NARENDRA KUMAR BILLAIYA, AM:

This appeal by the assessee is preferred against the order dated 07/08/2024 by NFAC, Delhi [hereinafter ‘the ld. CIT(A)’], pertaining to AY 2016-17.

2. The grievance of the assessee reads as under:-

“1. GROUND NO. 1: DISALLOWANCE OF RS. 35,67,897/- U/S.14A R.W.R.

8D:

1.1 On the facts and in the circumstances of the case and in law, the Id. CIT (A) erred in confirming the disallowance of Rs. 35,67,897/- u/s. 14A r.w.r. 8D incurred allegedly in relation to exempt income in the form of share of profit earned from a partnership firm.

1.2 The Id. CIT(A) failed to appreciate and ought to have considered that since interest income earned is more than interest expense for the year, no interest disallowance was warranted u/s. 14A.

1.3 The Id. CIT(A) further erred in ignoring that no disallowance of administrative expenses ought to have been made by the Id. AO in excess of expenditure debited to Profit and Loss Account.

1.4 The Appellant prays that the disallowance of Rs. 35,67,897/- made u/s. 14A r.w.r.

8D be deleted.

2. GROUND NO. 2: DISALLOWANCE OF INTEREST OF RS. 7,67,050/- U/S.

36(1)(iii):

2.1 On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in confirming the disallowance of Rs. 7,67,050/- although u/s. 36(1)(iii) as against the one made u/s. 14A by the Id. AO, which itself was not sustainable at first place. 2.2 The Id. CIT(A) failed to appreciate and ought to have considered that the interest expense incurred by the Appellant was for the purpose of its business and therefore ought to have been allowed.

2.3 The Appellant prays that disallowance of interest of Rs. 7,67,050/- made u/s.

36(1)(ii) be deleted.

GENERAL:

The Appellant craves leaves to add to, alter, amend and / or delete the above grounds of appeal.”

3. Briefly stated the facts of the case are that the assessee filed its return of income electronically on 28/09/2016 declaring total income of Rs.7,13,020/- which was processed u/s 143(1) of the Act by the CPC on 28/09/2018. Thereafter, the return was selected for scrutiny assessment under the CASS and accordingly statutory notices were issued and served upon the assessee.

4. While scrutinising the return of income, the AO found that the assessee has shown investment of Rs.5,32,20,195/- in the partnership firm Karwa & Kewal Kiran Realtors and Mahavir Developers. The AO noticed that the assessee has utilized interest bearing funds for the investment in the partnership firm from which it claimed exemption of share of profit from the firms. The assessee was asked to showcause why disallowance u/s 14A r.w.r 8D, should not be applied. The assessee filed detailed reply explaining the capital contribution in partnership firms which is as under:-

4.1. It was explained that the assessee has earned taxable interest from Karwa & Kewal Kiran Realtors and also exempt income being share of profit. However, no such income was earned from the partnership firm Mahavir Developers. It was strongly contended that any contribution by the partner to the capital of the partnership firm out of the borrowed funds on which interest was paid, such interest expenditure cannot be assumed to be an expenditure incurred for earning shares of profits from such partnership firm which is