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TMI Blog2014 (4) TMI 777X X X X Extracts X X X X X X X X Extracts X X X X ..... ar. ii) To disallow the expenditure u/s 14A, there should be live nexus between the expenditure incurred and the income not forming part of total income. iii) The appellant has claimed that no expenditure has been incurred for earning the exempt income. iv) That the investment in the partnership firm has been made as a measure of commercial expediency. v) That the investment in the partnership firm have been made out of interest free funds available with the appellant and when the funds are mixed hen the presumption would be that the investments are made out of interest free funds. vi) That the share income in the hands of partnership firm is not altogether tax free since the partner's income has suffered tax in the hands of the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed u/s 14A. It is submitted that the provisions of said section are not applicable in the case of the assessee company, since as per the provisions of sec. 14A(1) of the IT Act the primary condition for disallowance is factual incurrence of expenditure in relation to income forming part of total income. In order to disallow the expenditure u./s 14A there must be a live nexus between expenditure incurred and income not forming part of total income. 2. In the case of the assessee the company has not received any income during the year which is exempt and includible in the total income of the assessee. 3. Even otherwise, we enclose herewith a cash flow statement in respect of the source and utilization of funds during the year. From the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause of the borrowed funds. Now question arises that whether the investment made by the assessee was having any relation with the income earned during the year under consideration nor beneficiary for earning income in future? The answer of both the questions is in negative. The expense claimed by the assessee is neither relevant for the earning of its income of this year nor there is any relevance with its future income as the income earned as partner's share in future, if any will be an exempt income in its hands. Here in this case, it does not matter whether the provisions of section 14A of the Income Tax Act, 1961 are applicable or not. But the intention of inserting this section is clear deduction cannot be allowed in respect of exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere sufficient enough for making investment, it is a case of use of 'Mixed Funds" for making investment in two firms. Keeping in view, this the Ld Assessing Officer was justified in rejecting the claim of the appellant that no expenses were incurred for earning tax exempt income by the appellant and in the given circumstance, I hold that such a lack of satisfaction of the Assessing Officer was on cogent grounds, in the light of the decision of the Hon'ble Delhi High Court in the case of CIT v. Maxopp Investments Ltd. 203 Taxman 364, as the appellant had certainly used a part of borrowed funds for making investment in the two firms, however, interest expenses attributable to the same were not disallowed by it. In view of this the on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directed to compute the disallowance strictly in terms of provisions of Rule 8D after verification of computation given by appellant. The appellant shall get relief for the balance amount accordingly." 5. Aggrieved, the assessee is in appeal before us. 6. At the outset, the Ld AR submitted that no expenditure was incurred for earning of exempt income and there were sufficient interest funds available with the assessee company and therefore the disallowance was not warranted. 7. The Ld DR, on the other hand, relied upon the order of Ld CIT(A) and submitted that relevant relief has already been granted by Ld CIT(A). 8. We have heard the rival submissions of both the parties and have gone through the material available on record. We find ..... X X X X Extracts X X X X X X X X Extracts X X X X
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