9911796707
TMI Blog2014 (7) TMI 503X X X X Extracts X X X X X X X X Extracts X X X X ..... :- "1. On the facts & circumstances of the case the Learned Commr. of Income Tax (Appeals) has erred in confirming the additions made Under Section 14A read with Rule 8D. The appellant prays that the disallowances of Rs. 28,72,22,642/- is not justified as the networth of the company far exceeds its investments capable of yielding exempted income and be deleted. 2. The appellant prays that the activity of purchase and sale of shares is treated as business activity and the result of the said activity is offered for tax under the head 'Business Income'. In view of this no disallowance should be made u/s 14A r.w.r 8D. &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ges) 2,262,727,643 While calculating the disallowance the following have been considered. i) Interest on bank loan is reduced as incurred towards lending portfolio of the company ii) As per RBI regulations bank cannot lend for investment purpose to borrower, hence all the bank loan of IFIN are not used for investment purpose. iii) 0.5% of average value of investment capable of yielding exempted income is disallowed. Disallowance as per Sec. 14A of I.T. Act, 1961 as per Rule SD. Sr. No. Particulars Amount a) Expense directly related to Exempt Income -,- b) Allocated Interest Cost 24,99,03,7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tock-in-trade and, therefore, to the extent of these shares, no disallowance should be made under section 14A. He further contended that the assessee's total net worth is approximately Rs. 1260 crores whereas the investment in shares which was capable of earning exempt income were far less. Therefore, no interest cost should be disallowed while working out the disallowance under section under rule 8D. For all the above propositions, he relied upon various case laws including that of Bombay High Court in CIT v/s Reliance Utilities and Power Ltd., [2009] 313 ITR 340 (Bom.). 6. Before us, the learned Counsel for the assessee has submitted different working of disallowance based on his above proposition i.e., (i) working of disallowance, if ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has huge funds which also consist of interest free funds, then presumption would be that investments have been made out of interest free funds, available with the assessee and, therefore, interest cost cannot be made attributable. However, availability of interest free funds and investments which are capable of yielding exempt income, has not been examined properly either by the Assessing Officer or by the learned Commissioner (Appeals). Therefore, respectfully following the decision of the Hon'ble Jurisdictional High Court in Reliance Utilities and Power Ltd. (supra), we direct the Assessing Officer to re-examine the nexus of interest free funds and investment made. In case, the interest free funds are more than the investment, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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