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TMI Blog2016 (1) TMI 1303X X X X Extracts X X X X X X X X Extracts X X X X ..... ould have been made by the Assessing Officer under section 14A of the Act on account of interest expenditure relating to exempt income. A show cause notice under section 263 of the Act was issued to the assessee in this regard. 3. Before the learned Commissioner of Income Tax, the assessee made elaborate submissions as regards the investment in Spring India Ltd. and also in Jai Suspension System Limited. Since no adverse view was formed by the learned Commissioner of Income Tax with regard to the investment in Spring India Ltd., we will not be referring to the facts in this regard. As regards Jai Suspension System Limited, it was stated before the learned Commissioner of Income Tax that the investment amounting to Rs. 1,96,98,880/- was made in assessment years 2008-09 and 2009-10. The assessee had received dividend of Rs. 2,99,98,500/- on investment made in shares of Jai Suspension System Limited. The investment amounting to Rs. 2,00,080/- was made in assessment year 2008-09, while the investment of Rs. 1,94,98,800/- was made in assessment year 2009-10. It was submitted that the investment of Rs. 2 lacs in assessment year 2008-09 was made out of the profits after tax of Rs. 1606.4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the loans and the assessee has raised fresh loans amounting to Rs. 18.12 crores, out of which investment in shares of Jai Suspension System Limited has been made. In the view of learned Commissioner of Income Tax, had the assessee not invested in the shares of Jai Suspension System Limited, it was not required to raise loans to that extent from banks and financial institutions. Reliance was placed on the judgment of CIT Vs. Abhishek Industries Ltd., 286 ITR 1. Further, he held that since the assessee has earned dividend income on shares of Jai Suspension System Limited, the case laws relied on by the assessee are not applicable to the present case. On the argument taken by the assessee as regards the application of mind by the Assessing Officer, it was observed that the Assessing Officer had only enquired about the details of dividend income and nowhere asked the assessee specifically with respect to the disallowance of proportionate interest under section 14A of the Act. In view of this, the learned Commissioner of Income Tax held that the order passed by the Assessing Officer dated 28.1.2013 be cancelled to the extent of disallowance of interest expenditure under section 14A of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Tax Rules at pages 33 to 41. The submission of the learned counsel for the assessee in this regard was that it appears that the Assessing Officer being satisfied with the submission of the assessee no order under section 154 of the Act was passed. Another argument put forward by the learned counsel for the assessee was that since the investments in Jai Suspension System Limited were being made from earlier years, no disallowance under section 14A of the Act was either made in earlier years or in the subsequent years. Copies of Balance Sheet, Profit & Loss Account and orders passed under section 143(3) of the Act for assessment years 2008-09 to 2011-12 were filed in the Paper Book. Further, in assessment year 2012-13, it was stated that a specific question with regard to section 14A of the Act has been raised by the Assessing Officer, which was duly replied by the assessee. All these pages were referred to emphasize that the material, which the learned Commissioner of Income Tax can relied on in proceedings under section 263 of the Act includes not only the record as it stands at the time when the assessment order in question was passed by the Assessing Officer but also the recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rroneous and prejudicial to the interest of the Revenue and hence, the Commissioner of Income Tax has jurisdiction under section 263 of the Act to revise the same. 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. The undisputed facts of the case are that the assessee had made investments amounting to Rs. 1,99,99,000/- in the equity shares of Jai Suspension System Limited. Interest expenditure have also been debited to the Profit & Loss Account. The disallowance under section 14A of the Act may be called for in such circumstances, but the question to be decided by us is whether the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue so as to give the Commissioner of Income Tax the jurisdiction to revise the same under section 263 of the Act. 8. It is a trite law that for assumption of jurisdiction under section 263 of the Act by the Commissioner of Income Tax, the order of the Assessing Officer has to satisfy twin conditions of its being erroneous as well as prejudicial to the interest of the Revenue simultaneously i.e. the order ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the investments having been made out of owned funds of the assessee, our attention was invited to the Balance Sheet of the assessee as on 31.3.2008, which shows that an amount of Rs. 2 lacs was invested in the shares of Jai Suspension System Limited. On perusal of Paper Book page 47, we see that the assessee had total investments of Rs. 527 lacs while it had owned funds amounting to Rs. 10362.16 lacs, which goes to prove that the investments were made out of owned funds. Further, from the perusal of Balance Sheet as on 31.3.2009 placed at Paper Book 74, we see that further investment of Rs. 194.99 lacs was made during the year in equity shares of Jai Suspension System Limited. Further, on perusal of the same Balance Sheet, we see that the total investments are Rs. 721.99 lacs while the owned funds are amounting to Rs. 12,371.46 lacs, which further proves the fact that these investments were also made out of owned funds only. In view of the above, it is true that the assessee has made investments out of owned funds and no borrowed funds were used for such investments. In such a scenario, no disallowance under section 14A of the Act is called for. 12. Now, the situation emerges that ..... 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