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2015 (10) TMI 2646

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..... her goes to prove that the interest paid during the year does not have any nexus to the investments and thus not to the tax-free income from these investments having earned. Therefore, any disallowance of interest expenditure being related to earning tax-free income cannot be made in this case. There is no need to go further on the issue of disallowance of interest part of the expenses related to earning tax-free income, as from the explanation and evidences brought on record by the assessee, as stated hereinabove, it is proved beyond doubt that the interest expenditure incurred by the assessee during the year does not have any nexus to earning of tax-free income. As regards the administrative expenses part of the disallowance under .....

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..... me at ₹ 1,06,75,500/-. During the course of assessment proceedings, the Assessing Officer observed that the assessee had made investment to the tune of ₹ 67,50,41,000/- in the previous year. However, it has not shown any income on this except a dividend income of ₹ 23,16,000/-, which has been claimed as exempt under section 10(34) of the Income Tax Act, 1916 (in short the Act ). In view of the same, invoking the provisions of section 14A of the Act, disallowance of ₹ 84,00,560/- was made as per Rule 8D of the Income Tax Rules. 3. Before the learned CIT (Appeals), it was argued by the assessee that the investments as appearing in the balance sheet of the assessee have been made out of own funds, which is very much .....

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..... y evident from the balance sheet. Thus, she was not convinced by the arguments put forth and heavy reliance on the case laws to advance its contention. She was of the considered opinion that the claim of the assessee cannot be accepted and consequently, the application of Rule 8D of the Income Tax Rules by the Assessing Officer to compute the expenses relating to earning of exempted income was upheld. However, on pointing out by the assessee that the disallowance made by the Assessing Officer of ₹ 84,00,560/- exceeded the amount of dividend income earned, she restricted the disallowance to the extent of the exempt income of ₹ 23,16,000/-. 4. Aggrieved by the said order, now the assessee has come up in appeal before us on the .....

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..... since Rule 8D of the Income Tax Rules is an integral part of the Statute, the Assessing Officer is bound by it and deduction has to be made as per Rule 8D of the Income Tax Rules only. 7. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. It is seen from the perusal of the balance sheet, Profit Loss Account and the schedules annexed thereto (Paper Book Page-1) that the investments in earlier year was of ₹ 63,30,41,000/-, while it is to an amount of ₹ 67,50,41,000/- at the end of the current year, the increase of ₹ 4,20,00,000/- is on account of transfer of share application money to share allotment, as is evident .....

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..... the judgment of the Hon'ble Jurisdictional Punjab Haryana High Court in the case of Bright Enterprises Pvt. Ltd. Vs. CIT, ITA 224 of 2013 (O M) dated 27.7.2015, we hold that on the facts and circumstances, no disallowance on account of interest expenditure under section 14A of the Act can be made in this case. 9. As regards the administrative expenses part of the disallowance under section 14A of the Act, the assessee has all along been contending before the lower authorities that there was no need for it to incur any such expenditure and it has in fact incurred no such expenditure, the Assessing Officer straightaway, without commenting on such claim of the assessee, embarked upon computation under Rule 8D of the Income Tax Rules f .....

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