TMI Blog2015 (1) TMI 156X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, the surplus funds were sufficient to meet the advances in the investment made in the subsidiary – CIT(A) has given a categorical finding that the interest bearing funds have been used for business purpose and there is a nexus between interest expenditure incurred and loan taken by the assessee – the order of the CIT(A) is upheld and no disallowance of interest is called for. CIT(A) rigfhtly was of the view that in the year, disallowance u/s 14A cannot be made after applying rule 8D which is admittedly applicable from the AY 2008–09 - For the AY 2007–08, some reasonable disallowance should be made, which the CIT(A) has made 5% of the dividend income - Such a disallowance appears to be reasonable looking to the facts and circumstanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icting the disallowance to ₹ 3,68,450/- being 5% of dividend income without appreciating the fact that the decision of Hon'ble High Court in the case of MIs Godrej Boyce Manufacturing Co Ltd., is not accepted by the Department as also the facts of the case in Mis VIP Industries Ltd are distinguishable. 3. Whether on the facts and in circumstances of the case and as per law, the Ld. CIT(A) erred in deleting disallowance uls 14A of the I.T. Act while computing book profit uls 115JB of the I.T. Act. ? 2. Facts in brief: The assessee company is in the business of publication and printing of newspapers. During the course of the assessment proceedings, on examination of Balance Sheet, the Assessing Officer observed that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 725,308 Total borrowed funds ₹ 206,329,696 Finance cost ₹ 16,142,479 Borrowed funds used for investment in subsidiaries is Borrowed funds * investment in subsidiaries Share Capital reserve Fund + Borrowed fund 206,329,696*514,725,308 = ₹ 55,962,560 1,691,423,319+206,329,696 Proportionate interest is Borrowed fund used in subsidiaries * Finance cost Borrowed Funds 55,962,560 * 16,142,479= ₹ 4,378,306 206,329,696 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Page 3 to 6 of his order. After considering the assessee s submissions and the material on record, the learned Commissioner (Appeals) deleted the addition after giving finding of fact that the assessee had huge interest free funds to invest in subsidiary companies and were given for business purposes wherein the assessee has deep interest as holding company. He also analysed the findings of the Hon ble Supreme Court in S.A. Builders (supra) and also the other decisions and deleted the disallowance after observing and holding as under: 4. 2.7 So, in view of the aforesaid observations and decision of the Supreme Court and the fact that there is nexus between the expenditure and the purpose of business (which need not necessarily be busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the book profit under section 115J. 6. Before us, the learned Department Representative strongly relied upon the findings of the Assessing Officer and submitted that when the assessee has two kinds of funds i.e., interest bearing funds and interest free funds then it cannot be presumed that only the interest free funds have been advanced to the sister concern / subsidiary companies. Thus, proportionate disallowance was made by the Assessing Officer is definitely call for. Regarding 14A, he just simply relied upon the order of the Assessing Officer. 7. Before us, when the case was called for hearing, neither the respondent assessee nor any of its authorized representative appeared despite service of notice. 8. After considering the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . For the assessment year 2007 08, some reasonable disallowance should be made, which the learned Commissioner (Appeals) has made 5% of the dividend income. Such a disallowance appears to be reasonable looking to the facts and circumstances of the case. Thus, on this score also, we affirm the order of the learned Commissioner (Appeals). 10. Lastly, the disallowance under section 14A while computing the book profit under section 115JB, has already been directed by the learned Commissioner (Appeals) to be made, which is 5% of the dividend income and accordingly, such directions of the learned Commissioner (Appeals) is confirmed. Thus, grounds raised by the Department are dismissed. 10. In the result, Revenue s appeal is dismissed. Or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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