Judgment M.R. Shah, J. 1. As common question of law and facts arise in both these tax appeals challenging the impugned common judgment and order passed by the learned Income-tax Appellate Tribunal, both these tax appeals are heard, decided and disposed of together by this common judgment and order. Feeling aggrieved and dissatisfied with the impugned judgment and order dated October 10, 2014, passed by the learned Income-tax Appellate Tribunal, "B" Bench, Ahmedabad (hereinafter referred to as "the Tribunal") in I.T.A. No. 611/Ahd/2013 for the assessment year 2009-10 by which the learned Tribunal has partly allowed the said appeal by deleting the disallowance of the interest expenses under section 14A of the Income-tax Act, 1961 (hereinafter referred to as "the Act") read with rule 8D of the Income-tax Rules, 1962 (hereinafter referred to as "the Rules") in its entirety, the Revenue has preferred the present Tax Appeal No. 276 of 2015 with the following proposed question of law : "Whether, on facts and in the circumstances of the case, the Appellate Tribunal is right in deleting the disallowance made on account of interest expenditure under section 14A read with rule 8D though the assessee suo motu disallowed the amount on ad hoc basis ?" 1.1 Feeling aggrieved and dissatisfied with the impugned judgment and order dated October 10, 2014, passed by the learned Income-tax Appellate Tribunal, "B" Bench, Ahmedabad (hereinafter referred to as "the Tribunal") in I.T.A. No. 781/Ahd/2013 for the assessment year 2009-10 by which the learned Tribunal has dismissed the said appeal preferred by the Revenue confirming the deletion of disallowance of interest expenses under section 14A of the Act read with rule 8D of the Rules made by the learned Commissioner of Income-tax (Appeals) and deleting the disallowance made by the Assessing Officer under section 40(a)(ia) of the Act for non-deduction of TDS on overseas freight, the Revenue has preferred the present Tax Appeal No. 277 of 2015 with the following proposed substantial questions of law. "(A) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in deleting the disallowance made on account of interest expenditure under section 14A read with rule 8D though the assessee suo motu disallowed the amount on ad hoc basis? (B) Whether the Appellate Tribunal has substantially erred in allowing the amount of Rs. "(A) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in deleting the disallowance made on account of interest expenditure under section 14A read with rule 8D though the assessee suo motu disallowed the amount on ad hoc basis? (B) Whether the Appellate Tribunal has substantially erred in allowing the amount of Rs. 21,11,736 on account of disallowance made under section 40(a)(ia) of the Income-tax Act on account of non-deduction of TDS on overseas freight when the assessee has not submitted details of filing of return under section 172 of the Act by non-resident ship liner?" 2. Facts leading to the present tax appeals in a nut-shell are as under : "2.1 That the assessee filed return of income for the assessment year 2009-10 declaring a total income of Rs. 14,19,79,940. The return of income was processed under section143(1) of the Act. Subsequently, the case was selected for scrutiny and notices under section 143(2) were issued and duly served upon the assessee. 2.2 During the course of assessment proceedings, the Assessing Officer noticed that the assessee had made investment of Rs. 21,14,07,850 in shares and mutual funds. The assessee suo motu offered/disallowed the amount of Rs. 2 lakhs on account of section14A of the Act. As the Assessing Officer observed that the assessee is not able to justify that the investment made in shares is from his own funds or from the funds on which no interest payment is made by the assessee and, therefore, the provisions of section 14A of the Act is applicable and since the assessee has not offered disallowance worked out under section 14A of the Act, a show-cause notice was issued and served upon the assessee and the assessee was called upon to show cause as to why the disallowance under section 14A of the Act should not be made. In response to the said show-cause notice the assessee submitted its reply and explanation. Having not satisfied with the explanation given by the assessee, the Assessing Officer disallowed Rs. 14,06,934 by observing that the assessee made investment in shares and mutual funds amounting to Rs. 21,14,07,850 and interest expenses of Rs. 40,10,861 and that the assessee is not able to justify that the investment was made out of the interest-free funds. As the assessee suo motu disallowed Rs. 14,06,934 by observing that the assessee made investment in shares and mutual funds amounting to Rs. 21,14,07,850 and interest expenses of Rs. 40,10,861 and that the assessee is not able to justify that the investment was made out of the interest-free funds. As the assessee suo motu disallowed Rs. 2,00,000 in its computation of income, the effective disallowance was restricted to Rs. 12,06,934. 2.3 The Assessing Officer also disallowed an amount of Rs. 1,02,43,720 under section40(a)(ia) of the Act for non-deduction of the TDS on overseas freight. 2.4 Feeling aggrieved and dissatisfied with the order of assessment passed by the Assessing Officer of disallowance of the interest expenses under section 14A of the Act read with rule 8D of the Rules and also the disallowance made by the Assessing Officer under section 40(a)(ia) of the Act for non-production of the TDS on overseas freight, the assessee preferred an appeal before the learned Commissioner of Income-tax (Appeals). That the learned Commissioner of Income-tax (Appeals) partly allowed the said appeal and deleted the disallowance of Rs. 5,84,706 out of the disallowance of Rs. 12,06,934 made by the Assessing Officer under section 14A of the Act of the amount of disallowance of interest and administrative expenses. Meaning thereby the learned Commissioner of Income-tax (Appeals) confirmed the disallowance of administration and calculation charges of Rs. 6,22,228 under section 14A of the Act. The learned Commissioner of Income-tax (Appeals) deleted the entire disallowance of Rs. 14,06,934 made by the Assessing Officer under section 40(a)(ia) of the Act for non-deduction of TDS on overseas freight. 2.5 Feeling aggrieved and dissatisfied with the order passed by the learned Commissioner of Income-tax (Appeals), both the assessee as well as the Revenue preferred tax appeal before the learned Tribunal. The assessee preferred an appeal being I.T.A. No. 611/Ahd/2013 challenging the order passed by the learned Commissioner of Income-tax (Appeals) in so far as confirming the disallowance of administration and calculation charges of Rs. 6,22,228 under section 14A of the Act. The Revenue preferred an appeal being I.T.A. No. 781/Ahd/2013 challenging the order passed by the learned Commissioner of Income-tax (Appeals) in so far as deleting the disallowance of Rs. 5,84,706 out of the total disallowance of Rs. 6,22,228 under section 14A of the Act. The Revenue preferred an appeal being I.T.A. No. 781/Ahd/2013 challenging the order passed by the learned Commissioner of Income-tax (Appeals) in so far as deleting the disallowance of Rs. 5,84,706 out of the total disallowance of Rs. 12,06,934 made by the Assessing Officer under section 14A of the Act as well as deleting the disallowance made by the Assessing Officer under section14A of the Act for non-deduction of TDS on overseas freight. By the impugned common judgment and order the learned Tribunal has allowed the appeal preferred by the assessee being I.T.A. No. 611/Ahd/2013 and has deleted the disallowance made by the Assessing Officer under section 14A of the Act in its entirety, i.e., the entire amount of Rs. 12,06,934 disallowed by the Assessing Officer under section 14A of the Act and consequently dismissed the appeal preferred by the Revenue in so far as challenging the deletion of disallowance made by the learned Commissioner of Income-tax (Appeals) and also confirmed the order passed by the learned Commissioner of Income-tax (Appeals) in deleting the disallowance made under section 40(a)(ia) for non-deduction of TDS on overseas freight. 2.6 Feeling aggrieved and dissatisfied with the impugned common judgment and order passed by the learned Tribunal, the Revenue has preferred the present two tax appeals with the aforesaid substantial questions of law." 3. Mrs. Bhatt, learned counsel appearing on behalf of the appellant-Revenue, has vehemently submitted that the learned Tribunal has materially erred in deleting the disallowance of interest expenses under section 14A of the Act in its entirety. It is submitted that the learned Tribunal has not property appreciated the fact that the dispute with respect to the assessment year 2009-10 and, therefore, rule 8D of the Rules which had come into force with effect from March 2008, would be applicable. It is submitted that it is neither the learned Commissioner of Income-tax (Appeals) nor the learned Tribunal which disputed that there were mix kind of expenses and, therefore, in that view of the matter rule 8D would be applicable and, therefore, the entire expenditure was required to be disallowed under section 14A of the Act. Mrs. Bhatt, learned counsel appearing on behalf of the Revenue, has heavily relied upon the decision of the Bombay High Court in the case of Godrej and Boyce Mfg. Co. Mrs. Bhatt, learned counsel appearing on behalf of the Revenue, has heavily relied upon the decision of the Bombay High Court in the case of Godrej and Boyce Mfg. Co. Ltd. v. Deputy CIT reported in [2010] 328 ITR 81 (Bom) in support of her submission that rule 8D could be applicable from the assessment year 2008-09 and the expenditures are mix kind of expenditures. Mrs. Bhatt, learned counsel appearing on behalf of the Revenue, has further submitted that even the learned Tribunal has materially erred in confirming the order passed by the learned Commissioner of Income-tax (Appeals) deleting the disallowance made by the Assessing Officer under section 40(a)(ia) of the Act. It is submitted that while deleting such disallowance the learned Tribunal has not properly appreciated the provisions of the Act more particularly section 172 of the Act. It is submitted that admittedly there was no return filed by the recipient as required under section 172 of the Act and, therefore, section 172 of the Act would not be applicable. It is submitted that, therefore, both the learned Commissioner of Income-tax (Appeals) as well as the learned Tribunal have materially erred in deleting the disallowance made under section 40(a)(ia) of the Act for non-deduction of TDS on overseas freight. Making the above submissions and relying upon the above decision, it is requested to admit/allow the present tax appeals. 4. Heard Mrs. Bhatt, learned counsel appearing on behalf of the Revenue at length. We have gone through and considered in detail the assessment order as well as the order passed by the learned Commissioner of Income-tax (Appeals) as well as the impugned judgment and order passed by the learned Tribunal. 4.1 Now, so far as the deletion of disallowance of interest expenses under section 14A of the Act by the learned Tribunal/Commissioner of Income-tax (Appeals) is concerned, it is required to be noted that the Assessing Officer made the disallowance under section 14Aof the Act on the ground that the assessee was not able to justify that the investments made in the shares and mutual funds amounting to Rs. 21,14,07,850 was made out of the interest-free funds. 21,14,07,850 was made out of the interest-free funds. However, it is required to be noted that both the learned Commissioner of Income-tax (Appeals) as well as the learned Tribunal have categorically found on the basis of the material on record that as such the assessee was having interest-free funds out of which the investment was made. Therefore, by observing in paragraphs 6 to 9 extracted hereinbelow, the learned Tribunal has deleted the entire disallowance of Rs. 12,06,934 made by the Assessing Officer under section 14A of the Act. "6. We have heard the rival submissions and perused the orders of the lower authorities and material available on record. The undisputed facts of the case are that the Assessing Officer observed that the assessee has made investment of Rs. 21,14,07,850 and the assessee has paid interest on borrowed funds of Rs. 40,10,861. He also observed that the assessee has not made disallowance of interest expenditure according to section 14Aread with rule 8D of the Act. He, therefore, computed the proportionate disallowance of interest expenditure at Rs. 5,84,706 and disallowed the same. Before the Commissioner of Income-tax (Appeals), the assessee submitted that the assessee had borrowed funds for the purposes of vehicle and ok loan of Rs. 2,005 for captive power plant, and, therefore, no borrowed funds were used for non-business purposes. Further, the assessee relied upon the decision of the hon'ble Supreme Court in the case of S.A. Builders Ltd. [2007] 288 ITR 1 (SC) and Munjal Sales Corporation v. CIT [2008] 298 ITR 298 (SC) and the decision of the hon'ble Mumbai High Court in the case of CIT v. Reliance Utilities and Power Ltd. [2009] 313 ITR 340 (Bom) where it was held that if the interest-free funds of the assessee were sufficient for making investments, no disallowance of interest expenditure was called for. The Commissioner of Income-tax (Appeals) held that the finding of the Assessing Officer was not correct that the assessee has not charged any interest-free loan to associate concerns. He held that the assessee in fact earned interest income at the rate varying from 9 per cent to 12.5 per cent from the associated concerns depending upon the availability of surplus funds and thereby earned interest income of approximately Rs. 50.74 lakhs during the year. He, therefore, held that the disallowance made by the Assessing Officer under section 36(1)(iii) was of Rs. 40,10,861 was not justified. 50.74 lakhs during the year. He, therefore, held that the disallowance made by the Assessing Officer under section 36(1)(iii) was of Rs. 40,10,861 was not justified. 7. The Departmental representative has merely relied upon the order of the Assessing Officer. He has not pointed out any specific error in the order of the Commissioner of Income-tax (Appeals). He could not bring any material on record to show that the assessee could not have advanced interest-free loans or loans at lower rate of interest to the sister concerns out of its interest-free funds available with it. Therefore, we find no infirmity in the order of the Commissioner of Income-tax (Appeals) which is confirmed and ground No. 1 of appeal of the Revenue is dismissed. 8. Further, the Assessing Officer also made disallowance of Rs. 8,22,228 out of administrative expenses but had restricted the disallowance made to Rs. 6,22,228 as the assessee himself had made disallowance of Rs. 2,00,000 as expenses incurred for earning tax-free dividend income. The Commissioner of Income-tax (Appeals) observed that the said expenses must have been incurred by the assessee in making the investments and, therefore, confirmed the disallowance of Rs. 6,22,228 made by the Assessing Officer. The authorised representative of the assessee submitted that the assessee has earned dividend income of Rs. 12,200 as will be evidenced from the statement of accounts of the assessee at page 26 of the paper book for which disallowance of Rs. 6,22,228 cannot be made. 9. We find that the Assessing Officer as well as the Commissioner of Income-tax (Appeals) could not pinpoint any error in the computation of disallowance made by the assessee of Rs. 2,00,000 in earning tax-free dividend income. In the circumstances, in our considered opinion, disallowance of Rs. 6,22,228 could not have been made by the Assessing Officer and confirmed by the Commissioner of Income-tax (Appeals). Our above view finds support from the decision of the hon'ble Delhi High Court in the case of CIT v. Consolidated Photo and Finvest Ltd. [2012] 211 Taxman 184 (Delhi); [2013] 358 ITR 310 (Delhi). Therefore, we set aside the orders of the lower authorities and delete the disallowance of Rs. 6,22,228. Our above view finds support from the decision of the hon'ble Delhi High Court in the case of CIT v. Consolidated Photo and Finvest Ltd. [2012] 211 Taxman 184 (Delhi); [2013] 358 ITR 310 (Delhi). Therefore, we set aside the orders of the lower authorities and delete the disallowance of Rs. 6,22,228. Thus, ground No. 1 of appeal of the assessee is allowed." We are in complete agreement with the view taken by the learned Tribunal and the reasons given by the learned Tribunal while deleting the disallowance of interest expenses under section 14A of the Act. 4.2 Now, so far as the contention on behalf of the appellant with respect to the applicability of rule 8D of the Rules with effect from March 31, 2006, is concerned, there cannot be any dispute about the same. However, it is required to be noted that the Assessing Officer made the disallowance under section 14A of the Act solely on the ground that the assessee failed to justify that the investment was made out of the interest-free funds. However, both the learned Commissioner of Income-tax (Appeals) as well as the learned Tribunal have found otherwise. Under the circumstances, the decision of the Bombay High Court in the case of Godrej and Boyce Mfg. Co. Ltd. (supra) which has been relied upon by the learned counsel appearing on behalf of the Revenue would not be of any assistance to the facts of the case on hand. Therefore, we confirm the impugned judgment and order passed by the learned Tribunal in so far as deleting the disallowance of interest expenses under section 14A of the Act in its entirety. 4.3 Now, so far as the second proposed question of law raised in Tax Appeal No. 277 of 2015 arising out of the judgment and order passed by the learned Tribunal in I.T.A. No. 781/Ahd/2013, i.e., deleting the disallowance under section 40(a)(ia) of the Act for non-deduction of TDS on overseas freight is concerned, it is required to be noted that as per section 172 of the Act, payment made to the non-resident shipping company would not be covered in section 194C or section 194 of the Act. At this stage, it is required to be noted that it is not in dispute that the amount in question was in fact paid to the non-resident shipping company. At this stage, it is required to be noted that it is not in dispute that the amount in question was in fact paid to the non-resident shipping company. Under the circumstances, the learned Tribunal has rightly deleted the disallowance made by the Assessing Officer under section 40(a)(ia) of the Act. In view of the above and for the reasons stated above, we find that there is no error committed by the learned Income-tax Appellate Tribunal, 'B' Bench, Ahmedabad, while passing the impugned judgment and order. No substantial question of law arise in the present tax appeals. Under the circumstances, both these tax appeals deserve to be dismissed and are, accordingly, dismissed. In Favour of Assessee.