TMI Blog2016 (6) TMI 1262X X X X Extracts X X X X X X X X Extracts X X X X ..... s on the contrary, the 'a' has establish the fact that there is no nexus between the borrowed fund and investment in shares and also the 'a' firm is having the interest free funds and its investment in the Shares and the ld. CIT(A) has erred in sustaining the same. 2. That the ld AO has erred in law as well as on the facts and circumstances of the case in not following order of Hon'ble Bombay High Court as given in the case of Reliance Utilities Power Ltd 313 ITR 340 , which is an authority on the subject and thus is binding as submitted during the course of hearing and the ld. CIT (A) has erred in sustaining the same. 3. That the ld AO has erred in law as well as on the facts and circumstances of the case is disallowing the interest u/s 14A read with section rule 8D of the I.Tax Act or in other words not allowing the disallowed interest and ld CIT(A) has erred in sustaining the same. 2. In this case, original assessment was completed by the Assessing Officer U/s 143(3) of the Income Tax Act, 1961 (in short the Act) at ₹ 2,01,16,644/- which was revised after giving effect of order of the Hon ble ITAT dated 23/9/2011 at ₹ 1,43,31,5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowed under the provisions of Section 14A of the Act. It is further submitted that investment of shares at ₹ 18,77,160/- was made in A.Y. 1992-93 and subsequently in the relevant assessment year there were interest free fund of ₹ 19,43,629/- to the above extent, therefore, the assessee has established the nexus between the interest free fund available and the investment made therein. After considering the assessee s reply, the ld Assessing Officer held that the assessee had failed to furnish details of investment made in shares and availability of the cash as on from the date of investment in the shares. In absence of such details, the nexus between the investment in shares and availability of fund as on the date cannot be ascertained. Specific details regarding date of investment in shares and availability of cash as on the date has not been furnished by the assessee. Under these circumstances, it cannot be ascertained that the interest free fund were available to the assessee for investment in shares. Hence, interest on unsecured loan had been rightly disallowed by the Assessing Officer on proportionate basis as per provisions of Section 14A read with Section 8D o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 TTJ (Del) Special Bench 577. He also found the case laws referred by the assessee i.e. CIT Vs. Reliance Utilities Power Ltd. 313 ITR 340 (Bom) is distinguishable. Recently the Hon ble Delhi High Court in the case of CIT Vs Taikisha Engineering India Ltd. after considering the decision of Hon ble Bombay High Court in the case of CIT Vs. Reliance Utilities Power Ltd. (supra) vide order dated 09/3/2015 has held that disallowance of expenses made U/s 14A of the IT Act on exempt income, is valid if A.O. is not satisfied with the claim made by the assessee. The method for computing such disallowance has been prescribed under Rule 8D of the IT Rules. It was also held that if Rule 8D applies, assessee s claim that interest is not disallowable on ground of own funds is not acceptable. He further relied on the decision in the case of The South Indian Bank Ltd. Vs. CIT in ITA appeal No. 189 of 2011 order dated 22nd January, 2014/105 DTR (Ker) 299 (2014), therefore, he upheld the addition of ₹ 2,53,417/- U/s 14A of the Act. 4. Now the assessee is in appeal before us. All the three grounds of appeal are against the disallowances made U/s 14A of the Act. The ld AR of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 0204 (P H) order dt. 25.08.09 The Hon ble Supreme Court in case of CIT Vs. Walfort Share Stock Brokers Pvt. Ltd. 326 ITR 001 in Para 17 has observed that for attraction of section 14A, there has to be a proximate cause for disallowance, which is its relationship with the tax exempt income. In the present case, assessee has interest free funds and there is no proximate relation with the interest bearing borrowed funds and investment in shares. During the reassessment proceedings before the ld Assessing Officer, the assessee has submitted fund position as on 31/3/2009 and it is a fact that borrowed fund of ₹ 6.58 crores were entirely consumed in business assets of ₹ 7.86 crores. Before the ld CIT(A), it was further submitted that the assessee was having reserve and surplus in A.Y. 1999-2000 at ₹ 48.32 lacs. Further major part of investment is carry forwarded from A.Y. 1992- 93. The assessee had provided sufficient material on record to prove that no borrowed fund is utilized in making investment in shares. The requirement of the Assessing Officer to furnish the details of investment in shares and availability of cash on the date of investment in shares is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DR during the course of hearing. During the year, the assessee does not have dividend income and no investment has been made during the year in shares but all the investments are carry forwarded from A.Y. 1992-93. The ld CIT(A) relied on the decision of ITAT Delhi (Special Bench) in the case of Cheminvest Ltd. Vs ITO (supra) wherein it has been held by the Coordinate Bench of Delhi ITAT that in position of no dividend income, disallowance can be made by the Assessing Officer U/s 14A, which has been overruled by the Hon ble Delhi High Court vide order dated 2/9/2015 and held that there should be actual receipt of income for disallowance U/s 14A of the Act. The other arguments of the assessee also support that the assessee has exempt fund particularly reserve and surplus to make investment in the shares. The Hon ble Bombay High Court in the case of CIT Vs. Reliance Utilities Power Ltd. (supra) is squarely applicable. In absence of direct nexus between the interest bearing fund and investment in shares, no disallowance can be made by the Assessing Officer U/s 14A. Accordingly, we reverse the order of the ld CIT(A) and allow the assessee s appeal. 7. In the result, appeal of asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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