TMI Blog2016 (8) TMI 737X X X X Extracts X X X X X X X X Extracts X X X X ..... ned by the assessee or more than the investments made no disallowance could be made for interest expenditure. The presumption, as held by the various honorable High Courts, is that the assessee utilised its own funds for making investments. In the case under consideration the AO had not brought on record any fact proving that the loan taken by the assessee was not used for the business purposes. If the assessee had utilised the borrowed funds for its business and not for the investment, there was no justification for invoking the provisions of section 14A of the Act. Therefore, we hold that the order of the FAA confirming the disallowance of ₹ 43. 42 lakhs under the head interest expenses cannot be endorsed. As far as the disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A r. w. Rule 8D of the Income Tax Rules, 1962 (Rules) should not be calculated. Vide its letter dated 9/12/201 and 12/12/2011 the assessee argued that it had not incurred any direct expenditure for earning dividend income or for making any investment in the mutual funds, that the investments were made out of the surplus funds. After considering the submission of the assessee, the AO observed that the effect of section 14A was to widen the theory of the apportionment of the expenditure, that the expenditure incurred u/s. 14A would include direct and indirect expenditure but the relationship with the exempt income had to be approximate, that there was direct nexus between the expenditure incurred and the income not forming the part of total i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve(AR) contended that the loan was taken for the business purposes, that the borrowed funds were not utilised for making investment resulting in exempt income, that the own fund of the assessee was far more than the investments for the year under consideration, that AO had not made any disallowance under the head interest expenditure while completing the assessment for the AY. 2008-09 though the facts were identical. One query by the bench about the disallowance made on account of 0. 5% of the average investment, the AO stated that matter could be decided on merits. He referred to the cases of Oriental Structural Engineers Private Ltd. (ITA 605 of 2012)of the honorable Delhi High Court and Geojit Investment Services Ltd (ITA/261/Coch/2014-A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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