TMI Blog2014 (7) TMI 256X X X X Extracts X X X X X X X X Extracts X X X X ..... a direct nexus between loan, interest paid on loan amount, the interest received on margin money as well the investments made – thus, CIT(A) rightly held that the assessee was right in his action in netting the interest received against the interest paid, while calculating the interest expenditure incurred for the purpose of investments as the source of money for investment and the destination of expenditure were the same – thus, there was no infirmity in the order of the CIT(A) – Decided against Revenue. - ITA No.2362/M/2013 - - - Dated:- 26-6-2014 - Shri D. Karunakara Rao And Shri Sanjay Garg,JJ. For the Petitioner : Shri Paras Nath Shri Veenu Aggarwal For the Respondent : Shri Jeevanlal Lavidiya, D.R. ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... craves leave to amend or alter any ground or add a new ground which may be necessary. 3. The brief facts of the case are that during the relevant year under consideration, the assessee disclosed exempt dividend income of ₹ 5,60,973/- received from investment in a group company, Alok Industries Ltd. This investment was made out of term loan specifically taken for this purpose from IL FS Financial Services Ltd (hereinafter referred to as 'the lender'). As a security against the said loan, the assessee had pledged the shares purchased from the loan. However, as per the agreement with 'the lender', the assessee was required to deposit the difference between the loan amount and the value of security, as margin money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id disallowance, the assessee preferred appeal before the CIT(A). 5. The assessee submitted before the ld. CIT(A) that the additional, disallowance of ₹ 80,58,623/- made by the AO was unjustified firstly, on the ground that the AO simply applied Rule 8D without stating as to why the disallowance made by the assessee was not correct and how he was not satisfied with the assessee's disallowance. Secondly, the AO had not allowed the netting of interest for the purpose of disallowance under section 14A. However, the loan agreement with 'the lender' and ledger account of the assessee would clearly show that the interest earned on the margin money deposited and interest expenditure both were related to the same loan amount wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the interest expenditure incurred thereupon with the investment in Alok Industries Ltd., as also the exempt income earned from the said investment. Further, the lender also, was to pay interest to the assessee on the extra margin monies deposited as discussed above. In the circumstances, on the one hand, the assessee earned a marginal interest income from the margin money given to 'the lender' and on the other hand the assessee incurred interest expenditure in respect of the same term loan borrowed from 'the lender'. He therefore held that the interest expenditure that could be considered for disallowance was to be the net amount of interest which the assessee had to incur. While holding so, he further observed that the sour ..... X X X X Extracts X X X X X X X X Extracts X X X X
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