TMI Blog2014 (11) TMI 1041X X X X Extracts X X X X X X X X Extracts X X X X ..... of the profit and loss account as at the relevant dates being at ₹ 11.36 crores and ₹ 11.62 crores respectively. The assessee’s net worth being negative throughout the year, all its assets, including the tax-exempt investment in shares, stand financed from borrowed capital in the form of unsecured loans. Proportionate allocation, as advocated by r. 8D(2)(ii), statutorily prescribed per s. 14A, thus becomes even otherwise, i.e., having regard to the assessee’s accounts, the most appropriate method. The interest in respect of the said funds, since lost, would also stand to be allocated amongst the assessee’s assets. Qua this, we observe the interest (income) on advances to be much higher than on investments yielding dividend, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of interest expenditure u/s. 14A(1) and, two, the corresponding disallowance of book profit u/s.115JB of the Act. The assessee-company, in the business of investment, leasing and finance, was observed during the course of hearing to have received gross dividend at ₹ 6,55,522/-, claimed and allowed tax exempt u/s.10(34) of the Act. The assessee had further made suo motu disallowance on account of interest at ₹ 30,98,069/- there-against, besides another in respect of demat charges at ₹ 4,714/-. The disallowance u/s. 14A(1), in its view, had been rightly made, and ought to be accepted as such. In view of the Assessing Officer (A.O.), there was no basis for such restriction, either on facts or in law, so that the same was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee per its return of income. On it being further pointed out to him that the assessee s method was even otherwise flawed in-as-much as it was based on the assumption, which may not obtain, that the entire funds lent, earning interest, are sourced from borrowed capital only, it was explained by him that no further disallowance would be warranted in-as-much as the investments were made in the past from the assessee s own capital, adducing a chart detailing the investment in shares along with the dates of their acquisition, as well as the source of their funding. On being queried if this information had been also furnished before the authorities below, he admitted to it being not so. The ld. Departmental Representative (DR), on the ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rve from the investment chart adduced, the source of funding of many an investment in shares is ICD , i.e., inter-corporate deposits, which only denotes borrowed capital. Further, even as observed during the course of hearing, with reference to the assessee s balance-sheet (PB pgs.3-14), to of-course no repudiation by the ld. AR, the assessee s entire capital of ₹ 8.36 crores, both at the beginning and the close of the year, stands completely wiped off; the debit balance of the profit and loss account as at the relevant dates being at ₹ 11.36 crores and ₹ 11.62 crores respectively. The assessee s net worth being negative throughout the year, all its assets, including the tax-exempt investment in shares, stand financed fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assets, irrespective of the income generated by them, and therefore their contribution to the loss (of capital), thus, rather, favours the assessee in the facts of the case. We accordingly find no merit in the assessee s case, and have no hesitation in upholding the impugned order qua this disallowance. Gd. 1 is dismissed. 5. No specific arguments were raised by the assessee qua its Ground 2, which was in fact also not a subject matter of appeal before the first appellate authority. The matter, however, being legal, we admit the same. The disallowance of expenditure, interest or administrative, is only of that incurred by the assessee. If the same is not in the books of account, where we wonder it is? Both the income and expenditure, de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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