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2015 (10) TMI 2800 - AT - Income TaxLoss arising on transfer of assets - Loss under the head 'Income from Business or Profession' OR 'Loss from Short Term Capital Gains' - whether the amount of loss is to be treated as short term capital loss as claimed by the assessee or as business loss as treated by the lower authorities? - HELD THAT:- Since the findings of the Ld. CIT(A) for A.Y. 2006-07 have been reversed by the Tribunal by order dated [2014 (1) TMI 1599 - ITAT MUMBAI] and it is also an admitted fact that the investment pattern/ share transaction activity is almost identical to that of the earlier assessment year, hence, applying the same ratio and for the sake of principle of consistency, we hold that the short term capital loss returned by the assessee has to be treated as such and not as business income of the assessee. This issue is accordingly decided in favour of the assessee. Disallowance u/s 14A in relation to the expenditure incurred for earning of exempt income - HELD THAT:- A perusal of the assessment order reveals that the AO has not followed the guidelines of objective satisfaction as laid down by the Hon’ble Bombay high Court in the case of Godrej & Boyce [2010 (8) TMI 77 - BOMBAY HIGH COURT] while making the disallowance . He without recording any reasoning for his dissatisfaction with regard to the working/claim of the assessee, straightway applied Rule 8D against the mandate of the provisions of section 14A of the Income Tax Act. The ld. CIT(A) also ignored the mandate of the provisions of section 14 A, while confirming the disallowance. So keeping in view of the overall facts and circumstances of the case, we restore this issue back to the file of the AO with a direction that the AO will give opportunity to the assessee to place on record all the relevant facts including its accounts and then examine the computation/calculation made in this regard by the assessee having regard to the accounts of the assessee. The AO will be at liberty to call for any record/evidences or statement etc. from the assessee as may be required by him for deciding the issue under consideration. After going through the details provided by the assessee, the AO will decide the issue by way of a speaking order in the light of the observations made above. Disallowance of interest expenditure on interest free loan given - HELD THAT:- As observed that the Hon’ble Bombay High Court in the case of “CIT vs. Reliance Utilities and Power Ltd” [2009 (1) TMI 4 - BOMBAY HIGH COURT] has held that if there are funds available, both interest free and over draft and/or loans taken, then a presumption would arise that investments would be out of the interest free fund generated or available with the company, if the interest free funds were sufficient to meet the investment. Similar proposition can be applied in the case of assessee also. If the assessee is able to prove that sufficient own funds were available with the assessee then it has to be presumed that interest free loans were advanced by the assessee out of his own funds. This is required to be demonstrated from his accounts by the assessee before the AO. Further the assessee has claimed that it is a case of double disallowance. We accordingly restore the matter to the file of the AO to decide this issue afresh and also to verify as to whether any double disallowance has been made on this issue and to decide the issue in accordance with law.
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