TMI Blog2016 (6) TMI 529X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, the case of the assessee is fully covered by the decision of the jurisdictional High Courts. In the case of CIT V/s RELIANCE UTILITIES AND POWER LTD. [2009 (1) TMI 4 - BOMBAY HIGH COURT ] it has been held that if both funds are available with the assessee i.e. interest bearing funds and interest free funds then the presumption would arise that investment made would be out of interest free funds available with the company, if the interest free funds are sufficient to meet the investments. So far as the addition made under rule 8D(2)(iii) is concerned, the assessee company has demonstrated before us that the AO has completely ignored the facts of strategic investments of ₹ 1,36,65,695/- in the associate concerns which were i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 61 (The Act) read with Rule 8D of the Income Tax Rules, 1962 amounting to ₹ 17,53,454/- by the ld. CIT(A) as made by the AO. 4. The facts in brief are that the assessee filed is return of income on 27.9.2008 declaring current year s loss at ₹ 2,45,41,832/- under the normal provisions of Act and at ₹ 1,23,59,022/- under section 115JB of the Act. The case was selected for scrutiny and the statutory notices u/s 143(2) and 142(1) were issued and served upon the assessee. During the course of scrutiny assessment proceedings, the AO noticed that the assessee has exempt income to the tune of ₹ 14,97,49,864/- earned by way of dividend income and profit on sale of long term investment. However, the assessee did not attribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ributable to earning of exempt income. I have considered the appellant's this argument. Schedule - 6 of the balance sheet contains the details of investment i.e. quoted shares, long term investments and also unquoted shares. The appellant was holding shares of various scrips as appearing in the Schedule-6 of investments. The details shows that in respect of various scrips, the opening and closing balance were the same that means during the year no movements took place in those scrips. However, in case of shares of various other scrips, the opening balance of investments either increased or decreased. There were no new investments made during the year whereas in case of some of scrips, the same were sold during the year. Though the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded u/s.14A(1) of the Act, the applicability of provision of sec.14A(2) and the provisions of Rule 8D are mandatory and automatic. Therefore, the AO was justified in working out tile disallowance of indirect interest expenditure as per formula provided in Rule 8D of the IT. Rules. The disallowance made: by AO, is, therefore, upheld. This ground of appeal is therefore, dismissed. 5. Aggrieved by the decision of the ld.CIT(A), the assessee filed appeal before the us. The ld. AR submitted before us that the order passed by the AO and as confirmed by the ld. CIT(A) is totally wrong on facts and under law as the AO failed to appreciate the facts that the assessee s own funds were far more than the cost of investment held by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d cases. As regard the disallowance of ₹ 3,53,586/- made under Rule 8D(2)(iii), the ld. Counsel of the assessee submitted that the AO made the disallowance by totally disregarding the investment of ₹ 1,36,65,695/- in the equity shares of associate concerns which was a purely strategic investment and not covered under the said sub-rule. The ld. Counsel also submitted that the AO also did not consider the investment in growth schemes of mutual funds amounting to ₹ 8,15,61,466/- which are not tax free income yielding investment and therefore he submitted that the AO be directed to work out the disallowance by reducing the cost of strategic investment of ₹ 1,36,65,695/- and investment in growth schemes of Mutual funds am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing funds and interest free funds then the presumption would arise that investment made would be out of interest free funds available with the company, if the interest free funds are sufficient to meet the investments. In the case of HDFC BANK LTD (supra) the Hon ble jurisdictional High Court held that the petitioner was possessing sufficient interest free funds namely investment in tax free securities funds and consequently there is a presumption that the investment which has been made in the tax free securities is out of interest free fund available with the assessee. This decision has also reached finality as revenue has not challenged the decision before the Hon ble Apex Court. So far as the disallowance of ₹ 13,99,868/- is concer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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