9911796707
TMI Blog2013 (7) TMI 686X X X X Extracts X X X X X X X X Extracts X X X X ..... our adjudication is disallowance of following expenditures made under section 14A r/w rule 8D. i) Rs. 37,885, attributable to indirect interest; ii) Rs. 4,48,753, worked out on the basis of ½% of the average investment; iii) Rs. 1,15,464 being 25% of the dividend income earned by the minor. 3. Facts in brief:- On a perusal of the balance sheet, the Assessing Officer observed that the total investment in shares and other financial institutions, income from which do not form part of the total income as on 1st April 2007, was at Rs. 17,28,74,558 and similar investment as on 31st March 2008 was at Rs. 17,52,72,590. He further noted that the assessee has debited interest expenditure of Rs. 73,092, in the Profit & Loss account. The as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee that the daughter of the assessee has also earned dividend income of Rs. 4,61,857 and, accordingly, 25% of the dividend income was taken as expenditure for earning of the exempt income and, hence, Rs. 1,15,464, was also disallowed under section 14A. Thus, the total disallowance worked out by the Assessing Officer aggregated at Rs. 6,02,102. 5. The learned Commissioner (Appeals) too confirmed the disallowance made by the Assessing Officer on the ground that the assessee has failed to prove that no interest bearing funds were used to purchase the shares as the interest bearing funds and non-interest bearing funds were mixed up and, therefore, interest expenditure incurred in earning of exempt income cannot be correctly deter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w a direct nexus between the interest free loans and the investment made in shares, which has not been proved either before the Assessing Officer or before the learned Commissioner (Appeals). Thus, the disallowance on account of ½% of the average is fully justified. 8. We have heard the rival contentions and perused the findings of the Assessing Officer and the learned Commissioner (Appeals) as well as the material placed on record. Insofar as the disallowance of indirect interest expenditure of Rs. 37,885 is concerned, we agree with the contentions of the learned Counsel that the same cannot be disallowed in the assessee's case, firstly, the assessee has not claimed any interest in the Profit & Loss account and, secondly, the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade out of interest free / surplus funds. If the Assessing Officer gets satisfied with the same, then there is no need to compute disallowance as per rule 8D. However, the learned Counsel has pleaded before us that the assessee has interest free funds also and most of the investments have been made out of such funds. We, thus, set aside the impugned order passed by the learned Commissioner (Appeals) and restore the issue of disallowance under rule 8D to the extent of ½% of the average investment to the file of the Assessing Officer to examine whether or not the assessee had made acquisition in the investment out of interest free funds. The assessee is directed to provide all the necessary details for adjudication of this issue. Conse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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