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2022 (2) TMI 115 - AT - Income TaxDeduction u/s 80M - As noted by Ld. AO that the assessee earned dividend income and claimed deduction u/s 80M i.e. to the extent of dividend paid by the assessee - CIT(A) opined that in case of mixed funds, it could not be taken that the investments were out of interest free funds. The assessee was not able to link the share capital and reserves available with the investment - HELD THAT:- Undisputed facts that emerges are that the assessee had own funds by way of share capital and reserves as on 31.03.1990 for ₹ 600 Lacs. Therefore, the investments made on 28.01.1991 for ₹ 564.60 Lacs would bear direct nexus with the same. As on 31.03.1991, the assessee had share capital and reserves of more than ₹ 636.35 Lacs which have been invested in fixed assets and others and therefore, the same could not have been used for the purpose of making investment. However, the assessee had cash accumulations during first quarter of 1991 for ₹ 328.60 Lacs and therefore the investment made on 02.05.1991, to that extent, may be presumed to be made out of cash accumulations. The total investments made by the assessee stood at ₹ 1311.28 Lacs. Hence, the balance ₹ 418.08 Lacs of investment alone could be considered to be sourced out of borrowed funds. AR, in the written submissions, has stated that average cost of borrowing was 14% and considering the profits earned, 50% of cost of funds may be considered as proportionate to earning of income from dividend out of borrowed funds. Accordingly, 7% of ₹ 418.08 Lacs may be considered as proportionate interest expenditure which would roughly translate into ₹ 29.26 Lacs of proportionate interest expenditure. We find these submissions to be reasonable and acceptable and therefore, we direct Ld. AO to compute exact disallowance and restrict the interest disallowance to that extent. No disallowance of management expenses shall be made. No other material arguments have been adduced during hearing before us. Appeal partly allowed in favour of assessee.
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