TMI Blog2014 (1) TMI 918X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee had interest free funds of Rs.25.13 crore at the end of the year, as against investment of 3.39 crore, is also not disputed by the DR - In fact the CIT (A) has considered the additional evidence filed by the assessee, by admitted the same and called for remand report from the AO and on consideration of this remand report has given these factual findings - The revenue has not disputed the admission of additional evidence – Relying upon Maxopp Investment Ltd. Vs. CIT [2011 (11) TMI 267 - Delhi High Court]. Disallowance of proportionate administrative expenses – Held that:- The assessee has demonstrated that there is no regular activity carried out by the assessee for making investment - When there is no activity of investment wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,978/-, disallowing inter alia and amount of Rs.20,88,791/- u/s 14A of the IT Act 1961 ("hereafter referred to as the Act") r.w. Rule 8D of the IT Rules 1962 and an amount of Rs.52,200/- u/s 35D of the Act. 3. The assessee carried the matter in appeal. The first appellate authority granted relief. 4. Aggrieved the revenue is in appeal on the following grounds: "1. On the facts and in the circumstances of the case and in law, the learned CIT (A) has erred in deleting addition u/s 14A of the Income Tax Act amounting to Rs.20,88,791/-. 2. Ld. CIT (A) erred in concluding the assessment order does not indicate any satisfaction of the assessing officer regarding correctness of the claim of the assessee, despite the fact that the satisfac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he need for borrowing funds would not have arisen if the investments were not made. In other words, had the company not made investments, the total borrowings of the company would have been lower leading to reduction in interest costs. b) Apart from the above, the assessee has not attributed any administrative expenses towards earning of exempt income. The fact that there are certain expenses for earning exempt income cannot be denied. These expenses consist of time devoted by directors in deciding on the investment, cost of legal/financial/administrative advice obtained, cost of portfolio management etc. Therefore, I am satisfied that administrative expenses should be attributable towards earning of dividend." Thereafter he applied R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he interest bearing funds were tide up for specific business purpose and that during the year there is a decrease from the quantum of borrowed funds. Reliance was placed on a number of case laws. 9. On considering the facts of the case, we find that 99% of the investment held by the assessee during the year, were made in the previous A.Ys.. In the A.Y. 2005-06, the assessee had invested 1.6 crores in mutual funds / shares. It had interest free funds of 4.1 crore in that years. Latter in the A.Y. 2006-07 the assessee invested 1.78 crore in mutual funds / shares and in that year it had interest free funds of 4.04 crore. 10. During the year only an amount of 4 lakh was invested out of the total investment of 3.39 crores. In the earlier yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for making investment. When there is no activity of investment worth noting, no administrative expenditure can be apportioned. Under these circumstances, in a considered opinion, the first appellate authority has rightly relied on the decision of the Hon'ble Punjab Haryana High Court in the case of CIT Vs. Hero Cycles 323 ITR 518 ( P H ) and granted relief to the assessee. We uphold the same. 13. In the result ground no. 1 2 of the revenue is dismissed. 14. Ground no. 3 is on the disallowance of deduction claimed u/s 35D. The ld. CIT (A). At Para 4.1 page 24 of his order observed that similar claim was allowed by the AO in the A.Ys. 2005-06 2006-07 and on the principle of consistency the claim cannot be disallowed this year. Allo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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