TMI Blog2014 (5) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... aring funds – thus, no disallowance is called for in relation to interest expenditure under rule 8 D(ii) of the I.T. Rules – Decided in favour of Assessee. Disallowance of administrative expenses – Held that:- There is no reason to interfere in the order as the assessee himself offered disallowance of 0.5% of the average investment – Decided against Assessee. - ITA No.7740/M/2012 - - - Dated:- 21-3-2014 - SHRI P.M. JAGTAP AND SHRI SANJAY GARG, JJ. For the Appellant : Sri. S.L. Jain , DR For the Respondent : Sri. Pitambar Das, DR ORDER Sanjay Garg, Judicial Member The present appeal has been filed by the assessee against the order of the Commissioner of Income Tax (Appeals) (hereinafter referred to as CIT(A) dated 27.11.2012. The assessee has taken the following grounds of appeal. 1. The Ld. CIT(A) erred in confirming disallowance as made by the Ld. Assessing Officer u/s 14A r.w.s. 8D of Income Tax Act of Rs.21,03,784/- without properly appreciating the facts of the case and law applicable thereto. 2. The Ld. CIT(A) failed to appreciate that appellant has not claimed exemption for dividend received from Co-operative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reply of the assessee satisfactory. He noted that dividend earned was exempt income and even if the assessee had offered the exempt income for tax, the same cannot be taxed. He held that the provisions of section14A were clearly applicable in the case of the assessee. Being not satisfied with the working of disallowance u/s. 14A submitted by the assessee, he made a disallowance of Rs.17,25,234/- taking into consideration the expenditure on account of interest as per the method prescribed under Rule 8D(ii) of the I.T. Rules and disallowance of Rs.3,68,550/- as per the method prescribed under Rule 8D (iii) of the said rules on account of administrative expenses. The assessee preferred appeal before the CIT(A). 4. The ld. CIT(A) observed that the assessee had not shown the nexus between the investments in the shares and the surplus funds, if at all, available with the assessee. The assesse had made a general statement that the investments in the shares were out of the free reserves and surplus funds available with it based on the figures in the balance-sheet. The assessee had not shown that the amounts used for investments were kept in some other bank account and it was these amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Even though the assessee may not show in the absence of separate fund flow statement or separate accounts relating to business loans and transactions and investments made from own funds, but if the assessee is able to show the near proximity of availability of own funds may be exactly not on the date of investment or advancement of loan but in a very near future date or within a reasonable short period of time, even then the presumption will be that the investment was made by the assessee from his own funds or in anticipation of availability of its own funds within a short period of time. The principle underlying this proposition is that a businessman has to circulate his money according to the day to day requirements and the likely inflow and outflow of money in the near future is taken into consideration while making investments. Even if on the date of investment/expenditure, own funds may not be available with the assessee but if the investment/ expenditure is made in anticipation of availability of own funds and the own funds are available to the assessee within a very short period of time, then under such circumstances disallowance cannot be made on the entire loan amount bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TAL LOAN 6,16,92,625 4,42,55,088 8,09,25,325 26,89,65,933 23,22,23,924 4 Current Assets ( a ) Inventory 2,92,55,376 4,72,33,666 4,10,88,378 10,32,78,183 11,43,39,202 ( b ) Sundry Debtors 12,69,19,694 11,02,79,113 23,87,39,116 33,94,67,035 26,92,01,126 15,61,75,070 15,75,12,779 27,98,27,494 44,27,45,218 38,35,40,328 5 Interest Paid ( a ) On Packing Credit 10,61,579 7,90,982 2,46,376 1,10,09,764 39,33,828 ( b ) Bill Discounting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Fresh investment made during that year was of Rs.720.00 lakhs. He stressed that from the above, it was clear that the assessee had not utilized borrowed funds for making investments. Incremental borrowings of Rs.59.00 lakhs has been used for the purpose of business as the assessee borrowed funds from banks for its export under PCL limit as well as bill discounting limit. In AY 2006-07, investment continued to be the same. However, its secured borrowings fell down to Rs.4.32 crores during the year. In assessment year 2007-08, investment increased to Rs.737.10 lakhs. Thus, a fresh investment of Rs.17.00 lakhs over its capital and free reserves increased to Rs.22.10 crores. Secured loans were increased to Rs.799.25 lakhs and unsecured loans were of Rs.10,000/-. For assessment years 2008-09 and 2009-10, same investment continued and no fresh investment had been made. In assessment year 2008-09 free reserves and capital of the company were of Rs.29.89 crore and its borrowings from the bank being secured borrowing was of Rs.2689.65 lakhs. There was no unsecured loan. Assessee paid interest to the bank of Rs.138.80 lakhs. Up to assessment year 2008-09, no disallowance u/s 14A had been mad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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