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TMI Blog2015 (11) TMI 1668X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned counsel for the assessee preferred not to press ground Nos.1 and 2. The ground Nos.4 and 5 are general in nature. Therefore, the only ground to be decided by us is ground No.3. 3. In this ground, the contention of the assessee is that the disallowance made by the Assessing Officer under section 14A of the Income Tax Act, 1961 (in short 'the Act') read with Rule 8D of the Income Tax Rules is to be restricted to the extent of dividend income earned by it amounting to Rs. 98,870/- 4. Briefly, the facts of the case are that the assessee is in the business of manufacturing of iron & steel products and oxygen gas & generation of power. During the assessment proceedings, the Assessing Officer noted that the assessee had shown investm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt income. Reliance was placed on the judgment of the Hon'ble Jurisdictional High Court in the case of CIT Vs. Mascot Footcare in ITA No.67 of 2009 (O &M) dated 2.4.2014. Reliance was also placed on a number of orders of various Benches of the Tribunal including that of Chandigarh Bench in the case of Empire Packages (P) Ltd. Vs. ITO in ITA No.978/2013 dated 18.6.2015. 6. The learned D.R. relied upon the order of the Assessing Officer as well as that of the learned CIT (Appeals) and further submitted that in the case of CIT Vs. Walfort Share & Stock Brokers (P) Ltd. (2010) 326 ITR 1, it has been held by the Apex Court that the expenses only to the extent incurred for earning the taxable income are to be allowed to an assessee. 7. We h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee does not earn any tax free income, disallowance under section 14A of the Act cannot be made. The proposition as regards to no tax free income, no disallowance under section 14A of the Act has also been laid down by the Jurisdictional Punjab & Haryana High Court in the case of CIT Vs. Lakhani Marketing Ind. (2014) 111 DTR 149 (P&H). We do not find ourselves in agreement with the proposition that the Rule 8D of the Rules being mandatory, disallowance as per Rule 8D has to be made even in cases where no tax free income has earned or where tax free income earned is lesser than the amount computed as per Rule 8D of the Rules. In our view, the proposition laid down by various High Courts as mentioned hereinabove is applicable in the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n investment in land @ 8% and accordingly, capitalized an amount of Rs. 44,825/-. 14. Before the learned CIT (Appeals), it was submitted that the investments were made out of cash accruals of the assessee company, which is a sum of Rs. 22,76,10,565/- and the petty amount of investment in land was made out of the income for the year. Reliance was placed on the order of the Chandigarh Bench of the Tribunal in the case of DCIT Vs. Samrat Forging Ltd. in ITA No.975/Chd/2011 dated 24.5.2012. The learned CIT (Appeals) did not find himself in agreement with the submissions of the assessee. He observed that no specific term loan had been borrowed by the assessee for the purchase of land. The payments were made from CC account, which has debit bala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness. The proviso to section 36 (1) (iii) of the Act provides that where any amount of interest was paid, in respect of capital borrowed for acquisition of asset, then such interest which is relatable to the period beginning from the date on which capital was borrowed for acquisition of asset till the date on which such asset was first put to use, shall not be allowed as a deduction. 9. The provisions of main section and the proviso are in relation to the amount of interest payable on capital borrowed. The first juncture thus to be seen is whether the assessee had borrowed any capital for the purposes of investment in capital asset for extension of existing business or profession. In the facts of the present case, there is no finding by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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