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2016 (9) TMI 1594 - AT - Income TaxAddition u/s 14A - Disallowance of finance expenses and other expenses on investment in shares out of business income - as argued the appellant had surplus interest free funds available for investment in shares and hence no finance expenses and other expenses is attributable towards investment in shares - A.O. rejected the contentions of the assessee as the assessee is not able to establish a direct link with the interest free funds or own funds available with the assessee with the investments made and therefore the usage of interest bearing borrowed fund in making investment in shares, income from which does not form part of the total income, cannot be ruled out - HELD THAT:- As gone through the orders of authorities below. There is no finding of fact recorded in the orders of authorities below that assessee has its own surplus funds available in this year which are sufficient to make the investment - an unsigned chart has been submitted by the ld. Counsel for the assessee before the Tribunal whereby it is submitted that there is share capital of an amount of ₹ 60,48,00,000/- and reserves and surplus amounting to ₹ 2,09,36,78,634/-as at 31-03-2009 against which investments in shares stood at ₹ 1,28,67,27,471/- as at 31-03-2009. In the same unsigned chart it is also reflected an amount of ₹ 34,92,98,780/- under the head profits earned during the year as per P&L A/c, while dividend received stood at ₹ 8,47,63,455/- . - no audited financial statements are submitted by the assessee . We , however, agree with the proposition and contentions of the assessee that presumption will apply that the assessee has made investment in shares out of its own surplus funds unless contrary is brought on record keeping in view the decision of Reliance Utilities and Power Ltd., [2009 (1) TMI 4 - BOMBAY HIGH COURT] and HDFC bank Limited [2016 (3) TMI 755 - BOMBAY HIGH COURT] Hence keeping in view the factual matrix of the case as set out above, the disallowance of interest made by the A.O. under Section 14A of the Act read with Rule 8D(2)(ii) of Income Tax Rules, 1962 is not sustainable and ordered to be deleted subject to limited verification by the AO about the correctness of figures of net owned funds which includes share capital + reserves and surpluses- accumulated losses , as well as investments in shares etc made by the assessee which are capable of yielding exempt income as contended by the assessee before us through unsigned chart. Disallowance made u/s 14A read with Rule 8D(2)(iii) on disallowance @ 0.5% of average value of investment - matter with respect to disallowance of administrative and indirect expenses u/s 14A of the Act read with Rule 8D(2)(iii) of Income Tax Rules, 1962 needed to be set aside and restored to the file of the A.O. for de-novo computation of the disallowance of administrative and indirect expenses having regard to the accounts of the assessee as contemplated u/s 14A(2) of Income Tax Rules, 1962.
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