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2016 (4) TMI 857 - ITAT PUNE

2016 (4) TMI 857 - ITAT PUNE - TMI - Disallowance u/s.14A - Held that:- Since in the instant case the own capital and free reserves of the assessee company is much more than the investment in shares of group companies and associate concerns and since the assessee has not received any dividend income during the year, therefore,we are of the considered opinion that no disallowance u/s.14A on account of interest can be made. We accordingly set aside the order of the CIT(A) on this issue. However, t .....

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evenue : Shri Hitendra Ninawe ORDER PER R.K. PANDA, AM : This appeal filed by the assessee is directed against the order dated 18-02-2013 of the CIT(A)-II, Nashik relating to Assessment Year 2007-08. 2. Grounds of appeal No. 1 to 3 by the assessee are as under : On facts and in law, 1] The learned CIT(A) erred in confirming the disallowance of ₹ 38,87,288/- on account of interest and of ₹ 48,194/- out of telephone and electricity expenses on the ground that these expenses relate to t .....

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nd No. 1 & 2 is grossly incorrect for the following reasons - a. The flats at Khar were purchased in the name of the directors for the sake of convenience and the cost of the flats was borne by the appellant company and thus, the flats constituted the property of the company and not of the directors. b. The loans taken for meeting the cost of the flats were also repaid by the appellant company and the same was duly reflected in its books. c. If the properties are purchased by the appellant c .....

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non business purposes and such funds were utilized for business purposes and therefore, the question of disallowing interest of ₹ 31,71,672/- did not arise. 3. Facts of the case, in brief, are that the assessee is a Private Limited Company engaged in the business of manufacture and dealers of gold and gold ornament. It filed its return of income on 30-11-2007 declaring taxable income of ₹ 57,29,650/-. The AO had completed the assessment u/s.143(3) on 19-11-2009 determining the total .....

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a cost of ₹ 5,98,28,719/. The flats have been purchased in the name of Shri Ishwarlal Lalwani and Manish Lalwani. The loan has been obtained in their own name. The flats are also utilized for the purpose of residence. According to the AO no evidence of any kind for its use by the company was furnished. However, interest amounting ₹ 38,87,288/- and telephone and electricity expenses of ₹ 48,194/- has been claimed. Further, the assessee has shown its cost price at ₹ 5,98,28 .....

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of the company. 5. However, the AO was not satisfied with the explanation given by the assessee. According to him since the property stands in the names of individuals, therefore, it cannot belong to the company. The ownership of immovable property belongs to the person in whose name the property is registered. Thus, the company has no locus standi over the Khar flats for which the assessee company has not claimed any depreciation over it. There is no business use of the property. Therefore, th .....

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pose of assessee s business as well as the residence of one of the director of the company Shri Manish I. Jain. It was submitted that during the course of assessment proceedings all the relevant details regarding the use of flats for the business of the assessee company was filed before the AO. Merely because the flats are registered in the name of its directors the expenditure cannot be disallowed when the asset stands in the balance sheet of the assessee company in the asset side and the bank .....

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owed as deduction. 7. However, the CIT(A) was also not satisfied with the explanation given by the assessee. He not only upheld the action of the AO but enhanced the said disallowance by another ₹ 31,71,672/- by observing as under : 7.1 Purchase of Khar Flats: A perusal of the documents available on record (Agreement to sale dtd. 18/04/2006) reveals that Shri Ishwarlal Jain (Lalwani) and his son Shri Manish Lalwani bought a duplex flat No. 701 admeasuring 142.96 sq. mt on the 7th floor and .....

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d by appellant company on behalf of the purchasers. Scrutiny of the documents/statement of accounts further revealed that the appellant company had paid ₹ 66 lac to SBI during A.Y. 2007-08 towards repayment of principal (Rs. 27,12,712/-) and interest (Rs. 38,87,288/-) in respect of the housing loan on behalf of the directors. Besides, the appellant company is also shown to have incurred expenses of ₹ 31,30,607/- on account of franking charges and interior decoration in respect of the .....

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; 5 crore from SEI, jalgaon vide arrangement letter dt. 24/04/2006 for flat no. 701 (7th & 8th floor) 17th Road, Khar (West), Mumbai against the equitable mortgage of the said flat (Valuing ₹ 5.67 crore belonging to Shri Ishwarlal Jain and Shri Manish Jain) Smt. Pushpadevi Ishwarlal Jain and Smt. Nikita Manish Jain had provided third party guarantee. Further, the sale agreement dt. 18/04/2006 between Shri Vashu Bhagnani and Shri Ishwarlal S.Lalwani and Shri. Manish Lalwani clearly show .....

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nce of ₹ 1,67,00,000/-, expenses incurred on flats etc.. The appellant in its reply dt. 17/02/2013 has reiterated its earlier stand that the flats were owned by the company. The submission of the appellant is contrary to the facts. The registration of the flats is in the name of directors. If company would have owned the flats, it being separate legal entity, could have got registration of the flats in its own name. The explanation of the appellant is devoid of merit and hence rejected. It .....

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connection with the appellant's business, it cannot be allowed u/s 36(1)(iii) of the Act. In the facts and circumstances of the case an interest of ₹ 70,58,960/- (Rs. 31,71,672/- + ₹ 38,87,288/-) is disallowed u/s 36(1)(iii) of the Act for diverting the borrowed funds for nonbusiness purpose. The AO has already made a disallowance of ₹ 38,87,288/- on account of interest and ₹ 48,194/- in respect of telephone and electricity charges incurred by the appellant for the a .....

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ctors or other personnel of the company visit Mumbai, they have to stay at a place which is safe. Accordingly, the flats were purchased at Mumbai and were used by the company for business as well as residence of one of the directors. He submitted that the assessee company had purchased the flats at a consideration of ₹ 5,98,28,719/-. Referring to the audited accounts for the A.Y. 2007-08, a copy of which is filed at pages 4 to 23 of the paper book, the Ld. Counsel for the assessee drew the .....

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med is ₹ 2,18,73,103/- as per form 3CD. Referring to page 35 of the paper book, he drew the attention of the Bench to the schedule of depreciation according to which depreciation of ₹ 62,39,688/- has been claimed on buildings. Referring to the copy of the Board Resolution dated 10-02-2006 he submitted that the Board of Directors have approved for purchase of the flats by the company in the name of the 2 directors. He submitted that the AO has allowed depreciation on the flats. This o .....

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ore, he has accepted the flat as business asset used for the purpose of business. He accordingly submitted that the grounds raised by the assessee should be allowed. He also relied on the following decisions : 1. Addl.CIT Vs. Manjeet Engg. Industries. 154 ITR 509 (Delhi) 2. CIT Vs. Fazilka Dabwali TPT Co. Pvt. Ltd.270 ITR 398 10. The Ld. Departmental Representative on the other hand heavily relied on the order of CIT(A). 11. We have considered the rival arguments made by both the sides, perused .....

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the AO but he further enhanced the disallowance by ₹ 31,71,672/- being the interest on loan amount of ₹ 2,64,30,607/- diverted for non business purposes. The reasoning for such enhancement has already been reproduced in the findings given by the CIT(A). It is the submission of the Ld. Counsel for the assessee that since the flats have already entered into the block of asset and depreciation claimed in the original return has been allowed and the same has not been withdrawn, therefore .....

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own as liability in the liability side of the balance sheet. The Board of Directors vide resolution dated 10-02-2006 have approved for the purchase of the flats in the name of the 2 directors. Depreciation in the computation statement is as per Form No.3CD enclosed along with return of income. In the schedule of depreciation enclosed along with Form 3CD we find depreciation has been claimed at ₹ 2,18,73,103/- which includes the depreciation of ₹ 62,39,688/- on building/flats amountin .....

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ithstanding their registration in the names of directors. It is the defacto and beneficial ownership which is material and relevant. In the context of depreciation the courts have accepted the assessee s claim for the same even when property/vehicles are not registered in the name of company/firm but in the names of directors/partners. Addl.CIT Vs. Manjeet Engg. Ind. 154 ITR 509 Delhi CIT Vs. Fazilka Dabwali 270 ITR 398; P&H Ratio of the said decisions would also apply to the facts of our ca .....

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ess asset used for the purpose of business. We find the Hon ble Punjab & Haryana High Court in the case of CIT Vs. Fazilka Dabwali TPT Company Pvt. Ltd. following the decision of Hon ble Supreme Court in the case of CIT Vs. Poddar Cement Pvt. Ltd. and others reported in 226 ITR 625 has allowed the claim of depreciation on buses purchased in the name of its directors. Although the buses were not registered in the name of the company it was held that registration of the same in the name of the .....

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r having regard to the object of the Income tax Act, namely, " to tax the income", " owner " is a person who is entitled to receive income from the property in his own right. The Hon ble Delhi High court in the case of Addl.CIT Vs. Manjeet Engineering Industries (Supra) has held that when a partner brings his property to the partnership firm and the firm treats his property as belonging to the firm only, it has the effect of transferring the property to the firm. Document in .....

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lectricity expenses on account of flat at Khar, Mumbai in our opinion is not justified. In view of the above discussion, we are of the considered opinion that the CIT(A) was not justified in disallowing the interest expenditure and telephone and electricity expenditure relating to the flats at Mumbai. We accordingly set aside the order of the CIT(A) and the grounds raised by the assessee are allowed. 15. The Ld. Counsel for the assessee did not press grounds of appeal No.4 for which the Ld. Depa .....

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s during this year. 5.2] The learned CIT(A) failed to appreciate that the interest bearing funds were utilized by the appellant in its business and not for investment in the shares and thus, the question of disallowing any interest u/s 14A / Section 36(1)(iii) did not arise. 5.3] Without prejudice, the learned CIT(A) erred in rejecting the appellant's alternative contention that the disallowance u/s 14A r.w.r. 8D worked out to ₹ 12,77,399/- only and therefore, the disallowance of Rs.l, .....

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11 submitted as under which has been reproduced by the AO in the body of the assessment order : Sec.14A stipulates that no deduction shall be allowed in respect of expenditure incurred by an assessee in relation to income which does not form part of the total income under the Act. In this connection we would like to state that we have made investment in the shares of few private limited companies and a public limited company, under the same management. However, we may add that no dividend was de .....

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.e. for purchase of shares, hence interest is disallowable u/s.36(1)(iii). Moreover same furniture, electricity, telephone and business premises are used for the business purposes as well as for the investment in shares. Entries in the books of account are also made by same accountant. Hence, some portion of other expenses are also related to investment in shares. He noted that the interest burden to the assessee paid to bank was only ₹ 24,03,497/- as on 31- 03-2005 and no interest on unse .....

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05-06. From the various parameters he noted that the increase in turnover is 5.6 times only whereas the interest burden has increased to 15.85 times from A.Y. 2005-06. According to the AO had the assessee not invested in shares there was no need to pay such huge interest particularly pertaining to investment in shares. Hence, interest expenses not pertaining to business needs to be disallowed. Since the assessee could not correlate the date wise utilization of funds in shares, therefore, the AO .....

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the various explanations given by the assessee upheld the action of the AO by observing as under : 7.4 Disallowance u/s.14A u/s.36(1)(iii) of the Act. The AO has made an addition of ₹ 1,90,82,249/- on account of disallowance u/s 14A of the Act. The appellant has stated that the provisions of see. 14A were not applicable in its case as it did not have any exempt income and no dividend was received on investment made by it in its group companies. The appellant had cited various case laws in .....

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a debit balance of ₹ 17,97,55,244/- against Rajmal Lakhichand where its director Shri Ishwarlal S. Lalwani is having 40% share in profit/loss. The appellant company has charged interest @ 6% from M/s. Rajmal Lakhichand. Similarly the appellant company is charging interest @ 6% on balances outstanding against its directors. It is further seen that the appellant company has diverted huge funds to M/s. Rajmal Lakhichand which in turn has purchased shares of the appellant company in the name o .....

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e been used for obtaining loans and were therefore not available to make investment or giving loans/advances to its groups companies as claimed by the appellant. The hon'ble IT AT Hyderabad in the case of Ravindra Singh Arora Vs. ACIT (2012) 53 SOT 124 (Hyderabad in regard to disallowance of interest u/s.36(1)(iii) has held as under : 37. Section 36(1)(iii) of the Act provides for deductions of interest on the loans raised for business purposes. Once the assessee claims any such deduction in .....

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g term loans and working capital loans on which the assessee is incurring liability to pay interest, there was justification to advance loans to sister concerns for non business purposes without any interest and accordingly, the assessee should be allowed deduction of interest being paid on the loans raised by it to that extent. 38. The entire money in a business entity comes in a common kitty. Monies received as share capital, as term loan, as working capital loan or as sale proceeds do not hav .....

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according to it, could not be repaid prematurely to any financial institution, still the same is either required to be circulated and utilised for the purpose of business or to be invested in a manner in which it generates income and not that it is diverted towards sister concern free of interest. This would result in not presenting true and correct picture of the accounts of the assessee as at the cost being incurred by the assessee, the sister concern would be enjoying the benefits thereof. I .....

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i) of the Act. That being the position, there is no escape from the finding that interest being paid by the assessee to the extent the amounts are diverted to sister concern on interest free basis are to be disallowed. 39. If the plea of the assessee is accepted that the interest free advances made to the sister concerns for non-business purposes was out of its own funds in the form of capital introduced in business, that again will show a camouflage by the assessee as at the time of raising of .....

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#39;would depend on facts of each case. 40. Once it is borne out from the record that the assessee had borrowed certain funds on which liability to pay tax is being incurred and on the other hand, certain amounts had been advanced to sister concerns or others without carrying any interest and without any business purpose, the interest to the extent the advance had been made without carrying any interest is to be disallowed under Section 36(1)(iii) of the Act." 7.5 Notwithstanding the provis .....

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ssions, AR has drawn my attention to the recent decisions of the hon'ble Bombay High Court in the case of CIT V. M/s Delite Enterprises and hon'ble ITAT Mumbai, "F" Bench in the case of Avshesh Mercantile Pvt. Ltd., V. Dy.CIT. I have considered the issue and gone through the assessment order and submission of the appellant. It is seen that the appellant had made investment in the shares of its group companies out of the borrowed funds (secured loans raised from the Banks) and p .....

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/2009. Subsequently, the hon'ble Mumbai High Court has passed a judgment in the case of Godrej & Boyce Mfg. Co. Ltd. V Is. Dy. CIT [reported in (2010) 43 DTR (Bom) 177/ (2010) 328 ITR 81 (Bom)] on 12/08/2010. The hon'ble High Court of Bombay in its decision had held that disallowance under section 14A as per rule 8D, though constitutionally valid, cannot be made for the assessment years prior to the AY. 2008-09. In the prior year's disallowance was required to be made on reasonab .....

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calculation of rule 8D. As regards appellant's reliance on Delite Enterprises, I have gone through the judgment but find that the facts of that case are different from that of the present appeal. In 'Delite', the AYs involved were 2001-02 and 2002-03 when Rule 8D of IT Rules was not available. Further, in the case of 'Delite' the assessee company had made investment of borrowed funds in the capital of another partnership firm. The appeal related to the claim of the assessee .....

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prises (Supra) are not applicable, decision of hon'ble ITAT in the case of Avshesh Mercantile (P) Ltd. (Supra), based on Delite Enterprises, will also not support the appellant. The hon'ble ITAT Ahmedabad Bench IB' in the case of Shankar Chemical Works vs. DCIT [(2011) 47 SOT 121 (Ahmedabad)] has held that any expenditure incurred for earning exempt income has to be disallowed even if there is no actual earning of any exempt income. It has further held that if interest bearing borrow .....

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577 (Del) (SB) has held that sec. 14A would be applicable even if there is no receipt of exempt income during the year. The only controversy before the special bench was whether disallowance u/s 14A could be made where no dividend is received in the year under consideration. In this case the assessee had borrowed monies for acquiring shares as a trader as well as an investor but no dividend was received in the concerned year. The contention of assessee was that since no income forming part of to .....

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ch requirement of earning or receipt of income, such condition cannot be imported when it comes for disallowance of the same expenditure u/s 14A In coming to this conclusion, the bench relied on the decision of the Hon'ble Supreme Court in the case of CIT vs. Rajendra Prasad Moody 115 ITR 519 SC. It has been held that the term 'in relation to' is wide enough to include in its sweep the expenditure both "for making or earning income" and "incurred wholly and exclusively .....

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ed by the receipt of interest which has no relation to such expenditure. (A.Y. 2004-05). The Hon'ble ITAT, Delhi in the case of Technopak Advisors (P) Ltd. vs. Addl. CIT [(2012) 50 SOT 31 (Delhi)] has held that actual earning of the income is not sine qua non for deciding the deduction of expenditure laid out or expended wholly or exclusively for the purpose of earning the income. Thus, where investment has been made in shares, which did not yield any dividend in the year under consideration .....

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view that the expression "in relation to" appearing in s. 14A of the said Act cannot be ascribed a' narrow or constricted meaning. If we were to accept the submission made on behalf of the assessee then sub-s. (1) would have to be read as follows: "For the purpose of computing the total income under this chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee with the main object of earning income which does not form part of the total income u .....

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ssible deductions enumerated in ss. 15 to 59 are now to be allowed only with reference to income which is brought under one of the heads of income and is chargeable to tax. The Supreme Court further clarified that if an income like dividend income is not part of the total income, the expenditure /deduction related to such income, though of the nature specified in ss. 15 to 59, cannot be allowed against other income which is includible in the total income for the purpose of chargeability to tax. .....

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; 3,81,16,663/- comes out to be ₹ 1,90,70,249/- which has rightly been disallowed by the AO. Appellant's calculation of disallowance of ₹ 12,77,399/- sec.14A r.w.r. 8D is not applicable as far as the AY. under appeal is concerned. The disallowance of ₹ 1,90,70,249/- u/s 14A is therefore confirmed. 21. Aggrieved with such order of the CIT(A) the assessee is in appeal before us. 22. The Ld. Counsel for the assessee strongly challenged the order of the CIT(A). Referring to pag .....

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associated concerns and in subsidiaries, therefore, no disallowance u/s.14A is possible. Further, Rule 8D is not applicable for the impugned assessment year since assessment year involved is 2007-08 and Rule 8D is applicable from A.Y. 2008-09 onwards. He further submitted that since no dividend has been received by the assessee company, therefore, there is no question of any exempt income earned by the assessee. Referring to para 7.4 of the order of the CIT(A) he submitted that the Ld.CIT(A) ha .....

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terest free and overdraft and or loans taken, then a presumption would arise that investment would be out of the interest free funds generated or available with the company, if the interest free funds were sufficient to meet the investments. 24. Referring to the decision of the Pune Bench of the Tribunal in the case of CIT Vs. Bedmutha Industries Ltd. (Supra) vide ITA No.1277/PN/2013 order dated 29-01-2015 for A.Y. 2009-10, he submitted that the Tribunal in the said decision has held that when a .....

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rt in the case of Motors Pvt.Ltd. and the decision of Hon ble Punjab and Haryana High Court in the case of Lakhani Marketing has held that when the assessee has not received any dividend income out of shares held as investment and when no disallowance u/s.14A has been made in the preceding as well as in succeeding assessment year, then no disallowance u/s.14A can be made. Referring to the decision of Hon ble Delhi High Court in the case of Cheminvest Ltd. Vs. CIT reported in 318 ITR 33 he submit .....

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t when there is commercial expediency. He accordingly submitted that the order of the CIT(A) should be set aside and the grounds raised by the assessee should be allowed. 25. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). He submitted that there is a clear cut finding given by the CIT(A) that there is diversion of interest bearing funds for investment in shares of group companies and subsidiary company. Had the assessee not diverted funds for inv .....

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f disallowance u/s.14A of the Act on the ground that assessee has used borrowed funds for investment in shares of its group companies. The Ld.CIT(A) following the decision of Hyderabad Bench of the Tribunal in the case of Ravindra Singh Arora Vs. ACIT reported in 53 SOT 124 and various other decisions upheld the action of the AO. 27. It is the submission of the Ld. Counsel for the assessee that since the investment in shares of associate concerns and subsidiaries is less than the own capital and .....

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rcial expediency, therefore, no disallowance u/s.36(1)(iii) is also permissible. 28. From the various details furnished by the assessee, we find the investment in associate concerns and in subsidiaries as on 31-03-2006 was ₹ 2,57,15,800/- which has come down to ₹ 1,36,46,800/- as on 31-03-2007. The own capital and free reserves of the company has gone up from ₹ 1,21,33,691/- as on 31-03-2006 to ₹ 2,93,86,435/- as on 31-03-2007. Thus, the investment in shares of associate .....

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at the same time the assessee had raised a loan it can be presumed that the investments were from the interestfree funds available. In our opinion, the Supreme Court in East India Pharmaceutical Works Ltd. v. CIT [1997] 224 ITR 627 had the occasion to consider the decision of the Calcutta High Court in Woolcombers of India Ltd. [1982] 134 ITR 219 where a similar issue had arisen. Before the Supreme Court it was argued that it should have been presumed that in essence and true character the taxe .....

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that the profits were sufficient to meet the advance tax liability and the profits were deposited in the over draft account of the assessee and in such a case it should be presumed that the taxes were paid out of the profits of the year and not out of the overdraft account for the running of the business. It noted that to raise the presumption, there was sufficient material and the assessee had urged the contention before the High Court. The principle, therefore, would be that if there are fund .....

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. CIT has held that when no exempt income was earned by the assessee in the relevant assessment year and the genuineness of the expenditure incurred by the assessee was not doubted no disallowance can be made u/s.14A. The relevant observation of the Hon ble High Court reads as under : 15. Turning to the central question that arises for consideration, the Court finds that the complete answer is provided by the decision of this Court in CIT v. Holcim India (P) Ltd. (decision dated 5th September 20 .....

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rts which have decided the issue against Revenue. The first was the decision in Commissioner of Income Tax, Faridabad v. M/s. Lakhani Marketing Incl. (decision dated 2nd April 2014 of the High Court of Punjab and Haryana in ITA No. 970/2008) which in turn referred to two earlier decisions of the same Court in CIT v. Hero Cycles Limited[2010] 323 ITR 518 and CIT v. Winsome Textile Industries Ltd. [2009] 319 ITR 204. The second was of the Gujarat High Court in Commissioner of Income Tax-I v. Corrt .....

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: "15. Income exempt under Section 10 in a particular assessment year, may not have been exempt earlier and can become taxable in future years. Further, whether income earned in a subsequent year would or would not be taxable, may depend upon the nature of transaction entered into in the subsequent assessment year. For example, long term capital gain on sale of shares is presently not taxable where security transaction tax has been paid, but a private sale of shares in an off market transac .....

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clared, it is subjected to dividend distribution tax." 17. On facts, it was noticed in CIT v. Holcim India (P) Ltd. (supra) that the Revenue had accepted the genuineness of the expenditure incurred by the Assessee in that case and that expenditure had been incurred to protect investment made. 18. In the present case, the factual position that has not been disputed is that the investment by the Assessee in the shares of Max India Ltd. is in the form of a strategic investment. Since the busin .....

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es of Max India Ltd.; that no exempted income was earned by the Assessee in the relevant AY and since the genuineness of the expenditure incurred by the Assessee is not in doubt, the question framed is required to be answered in favour of the Assessee and against the Revenue. 31. We find the Pune Bench of the Tribunal in the case of Bedmutha Industries Ltd. (Supra) has held that when the own capital and free reserves are more than the investment in shares and mutual funds the income of which is .....

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find the investment in shares and mutual funds as on 31-03-2009 is shown at ₹ 19,25,654/- as against ₹ 16,58,300/- in the preceding year. Further, there is no dispute to the fact that the own capital and free reserves of the assessee company as on 31-03-2009 is ₹ 19,54,56,058/- as against ₹ 13,78,51,972/- in the preceding year. Thus, even at the beginning of the assessment year, the own capital and free reserves of the assessee company is much more than the investment in .....

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ng exempt income has observed as under : 6.3 We find that there is no categorical finding of the AO that the assessee utilised the interest bearing fund for making the investment in the mutual funds. We further find that AO has applied section 14A(2) but section 14A(2) only vests powers in the AO for quantification of the expenditure for making the disallowance but at the same time section 14A(2) does not override section 14A(1) of the Income Tax Act. 6.4 In the case of Hero Cycles Ltd. (Supra) .....

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ot be profit on the transfer of the mutual funds but as we have held that there is no specific finding by the AO nor by the CIT(A) that infact the assessee has used the interest bearing funds for investment, on this factual aspect, we hold that there is no justification to make the disallowance. We accordingly delete the addition made by the AO u/s.14A r.w. Rule 8D as the mandate of section 14A(1) is not fulfilled. 8.2 Similar view has been taken by the Tribunal in the case of M.D. Industries (S .....

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3 However, as regards the disallowance of ₹ 8,636/- under Rule 8D(2)(iii) is concerned the same relates to disallowance of administrative expenses. Nothing has been brought to our notice that administrative expenses is not required or has not been incurred for earning such exempt income. Therefore, in absence of any such details the disallowance under Rule 8D(2)(iii) amounting to ₹ 8,636/- has to be sustained. We hold and direct accordingly. The ground raised by the Revenue is accord .....

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val arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer disallowed an amount of ₹ 25,10,262/- u/s.14A on the ground that borrowed funds are diverted for investment in shares, the dividend income of which is exempt from tax. Therefore, the Assessing Officer disallowed an amount of ₹ 19,23,300/- out of .....

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e of investment towards administrative expenses etc. is concerned we find the CIT(A) sustained the same. 9.1 It is the submission of the Ld. Counsel for the assessee that all the shares are held in physical form and not in Demat account and no dividend income has been received on account of shares held under the head investment . Whatever dividend was received was in the share trading account . The above submission of the Ld. Counsel for the assessee could not be controverted by the Ld. Departme .....

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m part of the total income under the Act. Hence, what Section 14A provides is that if there is any income which does not form part of the income under the Act, the expenditure which is incurred for earning the income is not an allowable deduction. For the year in question, the finding of fact is that the assessee had not earned any tax free income. Hence, in the absence of any tax free income, the corresponding expenditure could not be worked out for disallowance. The view of the C1T(A), which h .....

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