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2013 (4) TMI 828 - AT - Income TaxDisallowance u/s 14A - nexus between the borrowed funds on which the interest was paid and the mutual funds purchased by the appellant - Held that:- As per the facts brought on record, if there is availability of interest free funds to make investment in mutual fund and there is no question of disallowance of interest. On the other hand, if the assessee used the interest bearing funds to make investment in mutual funds then proportionate interest has to be disallowed. The assessee is duty bound to establish the nexus between availability of interest free funds to make investment in mutual funds at the time of making such investment. In other words at the point of time of making investment there should be sufficient interest free funds available with the assessee. Being so, we remit the issue to the file of the Assessing Officer for such consideration in the light of above observations. Addition being the expenses for issue of shares to Qualified Institutional Buyers claimed in accordance with the provisions of Sec. 35D - Held that:- Admittedly, the assessee's claim u/s. 35D was in the A.Y. 2006-07 held that it would not be proper to debit the entire amount in one year as it would violate the matching principle. On the other hand, it is clear that the benefits of the expense will accrue to the appellant over many financial years. But. it cannot be quantified accurately as to how much would be the benefit in a particular financial year. unlike in bonds, where quantifications are simple and accurate, in this case, it is ultimately the judgement of the business head based on realities of the industry and economy which will determine the amount by which or the percentage of benefit available in a particular year. In the present case, the management has decided that the benefits of the expense will accrue to the company over a period of 12 years. The Assessing Officer does not have any contrary information to indicate a shorter or longer period. Thus the expense in question is to be treated as deferred revenue expenditure and allowed as claimed by the appellant. This issue is decided in favour of assessee.
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