Siddhartha Nautiyal ORDER
Siddhartha Nautiyal, Member (J)
1. This is an appeal filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals)-9, Ahmedabad in Appeal no. CIT(A)-9/10328/ITO Wd-3(1)(1)/17-18 vide order dated 03/07/2019 passed for the assessment year 2009-10.
2. The assessee has raised the following grounds of appeal:-
"1. In law and in facts and circumstances of the Appellant's case, the learned CIT(A) has grossly erred in points of law and facts.
2. In law and in facts and circumstances of the Appellant's case, the learned CIT(A) has grossly erred in confirming disallowance U/S. 14A r.w. rule 8D of I.T. Rules for Rs. 15,28,320/-
3. Your appellant reserves the right to add, alter, amend all or any of the above grounds of appeal as may be advised from time to time."
3. The brief facts of the case are that originally the assessee filed an appeal before ITAT, Ahmedabad regarding disallowances made under section 14A of the Act. The ITAT vide order dated 15-03-2003 allowed substantial relief to the assessee and restored the matter back to the file of the assessing officer with the following observations:
"7.5 "...... Thus, in order to examine the relevant facts, it would be expedient to remit the issue back to the file of AO. The AO shall grant reasonable opportunity to enable the assessee to demonstrate whether own funds together with interest free funds surpasses corresponding investment in shares, etc., and other non-business investments in aggregate. In the light of above discussion, the Assessing Officer is directed to examine the issue afresh in accordance with law after giving proper opportunity of being heard.
"8. In conclusion, the assessee would be entitled to benefit of set off of interest on AO being satisfied that the assessee is holding sufficient own fund together with other interest-free borrowed funds and other receipts at its command which are sufficient to cover the corresponding investments and other non-business utilization of funds. The disallowance of interest, if any, would thus be restricted in proportion to the shortfall in own funds and non-interest hearing fund in cumulative qua average of investments and other personal or non-business utilization as noted above.
9. The matter is remanded back to the file of the AO for deciding the issue afresh in terms of directions noted above."
4. Pursuant to directions of ITAT, Ahmedabad, the Ld. Assessing Officer agreed to assessee's contention in respect of exclusion of taxable investment of ` 11,80,46,000/- in unquoted security receipts of JMFRC on the ground that income generated by way of income/gain on the above mentioned investment were taxable and not exempt and therefore the investments of ` 11.80 crores do not qualify for disallowance under section 14A of the Act. The AO in his order further held that net interest expense of ` 65,88,474/- (` 27,83,07,877-interest expenses) minus ` 27,17,19,403/- (interest income) has to be considered for disallowing interest expense under section 14A of the Act. He further held that a sum of ` 1,11,52,075/- worked out at 0.5% of the average exempt assets of ` 23,04,14,963/- was not allowable under section 14A of the Act, as it is based on the binding formula as provided under section 14A of the Act. Accordingly, the Ld. Assessing Officer made the total disallowance of ` 15,28,320/- under section 14A of the Act. Aggrieved by the assessment order, the assessee filed appeal before Ld. CIT(A), who dismissed the appeal of the assesse........