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2010 (12) TMI 738 - AT - Income TaxDisallowance u/s 14A - AO, disallowed interest of ₹ 16,65,919/- on a pro-rata basis, invoking the provisions of section 14A of the I.T. Act - Nothing has been brought on record to counter the assessee's contention that the investment in the tax free bonds had been made out of the share holders' funds - it was held that where an assessee seeks to deduct certain items from his business profits, the onus of proving the same falls on him - The obvious implication of this observation is that the assessee been able to show that it has got surplus before the investment then it could claim that such investments have been made out of the surplus not from borrowed funds - The assessee has also been able to show in this case that the funds borrowed have been utilized for the business of the company as is evident that the bank loans have been obtained for the working capital of the company - it very clear that the AO had disallowed the interest on the ground that had assessee not made the investments, it would have saved the interest expenditure incurred on loans as the investment amount would have gone to reduce the loan - The assessee is entitled to take his own decision and to carry on the business with more of the borrowed funds rather than using his own funds - Decided in favour of the assessee
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