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2013 (10) TMI 1304 - AT - Income TaxDisallowance under section 14A - quantifying the borrowing attributable to the balance investment in shares and units (Rs. 156.12 lakhs), i.e., after deducting the amount of borrowings for the said investment made from Kotak Mahindra Prime Ltd. at ₹ 205 lakhs - Held that:- CIT(A) has in applying the average method, erred inasmuch as he has adopted the figure of the total investment (at ₹ 795 lakhs), i.e., as per balance-sheet, even as investment to the extent of ₹ 205 lakhs stands already confirmed to be sourced from the borrowings from Kotak Mahindra Prime Ltd., so that it is only the balance investment in business that is to be taken into account, i.e., in the denominator, excluding ₹ 205 lakhs both from the value of the exempt investment as well as the total investment. Needless to add, if the bank loans are dedicated funds, toward financing working capital, application of which is demonstrated, the same would also warrant a similar exclusion to the extent it is funding by borrowed capital is established. Unless, however, the same is perceptibly demonstrated, the common pool of funds hypothesis, could apply, being reasonable, so that all the funds, howsoever derived, are construed as having financed the relevant investments proportionately. Thus consider it fit and proper that the matter qua the disallowance under section 14A with reference to the interest attributable to the balance investment of ₹ 156.12 lakhs is restored back to the file of the learned Commissioner of Income-tax (Appeals), so as to allow the assessee an opportunity to present its case before him, and who shall decide the same in accordance with law, issuing definite findings of fact, and after hearing both parties, giving the assessing authority due opportunity to examine and rebut the assessee's case. Decided in favour of assesse by way of remand.
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