TMI Blog2013 (7) TMI 359X X X X Extracts X X X X X X X X Extracts X X X X ..... oes not arise a question of disallowing expenditure under Section 14A of the Act - Decided in favour of Assessee. - Tax Appeal No. 948 of 2012 - - - Dated:- 2-7-2013 - Mr. M. R. Shah And Ms. Sonia Gokani,JJ. For the Appellant : Mrs. Mauna M Bhatt, Advocate ORDER (Per : Honourable Ms. Justice Sonia Gokani) Challenging the order of the Income Tax Appellate Tribunal, Ahmedabad { Tribunal for short} dated 29th June 2012, this Tax Appeal is preferred by the Revenue, proposing following substantial questions of law for our consideration : {A} Whether the Tribunal is right in law and on facts in confirming the order of the CIT [A] in deleting the disallowance of Rs. 18,38,000/= made under section 14A of the Income Tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the Company had reserves and surplus of Rs. 22.33 Crores [rounded off] and the outstanding loan of the company ran into Rs. 2077.05 lacs as on 31st March 1999. The loan was interest bearing loan. The amount earned by way of dividend to the tune of Rs. 15.63 lakhs was exempt income and for earning such income, investment made by the Company to the tune of Rs. 18.38 lakhs had been disallowed on the ground that such investment was made from interest bearing funds and hence, section 14A of the Act would disentitle the petitioner from having such expenditure deducted. The Assessing Officer was of the opinion that the total investment of the assessee was to the tune of Rs. 471.27 lacs, and therefore, investment made for earning exempted i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has submitted that he has not incurred any expenses for earning the income. The Assessing Officer has not given any clear finding of incurring of expenses, and has not established nexus of expenses incurred with the earning of exempt income. Section 14A (2) empowers the Assessing Officer to determine the amount of expenses incurred in relation to tax free income if having regard to the account of the assessee, he is not satisfied with the correctness of the claim of the assessee. The Assessing Officer can proceed to invoke Rule 8D only when he is prima facie not satisfied with the correctness of claim by assessee in respect of such expenditure or expenditure having been incurred in relation to exempt income. In view of the aforesaid facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er itself, the interest free funds with the assessee was to the tune of Rs. 1.56 Crores, even if the outstanding loan of Rs. 2077.06 lacs as on 31st March 1999 is taken into account. Since we are only concerned with a sum of Rs. 18.38 lacs disallowances of which has been made under section 14A of the Act; even if the Tribunal has held that this was a question of mixed funds, the further reasonings given by the Tribunal cannot be ignored nor can earlier version be viewed in isolation. These findings cannot be said to be in consonance with the findings of the Assessing Officer. We also hold that the CIT [A] and the Tribunal both have specifically held the said amount has not been rightly disallowed since the same had been expended from inte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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