TMI Blog2011 (7) TMI 1316X X X X Extracts X X X X X X X X Extracts X X X X ..... . ITA No. 2630/M/2010 - appeal by the Assessee 3. Ground No. 1 is regarding disallowance of finance charges paid of ₹ 52,48,328/- on borrowed fund. 4. Briefly stated the facts relating to raise this ground are that on examination of balance sheet, the AO observed that during the year under consideration, the Assessee company had invested an amount of ₹ 52,13,26,800/- in the form of equity and advancement of loans to subsidiary companies. On these investments and advances no income had been earned during the year. It was further noticed that the balance sheet of the Assessee had interest bearing funds to the tune of ₹ 19,20,67,163/- and the Assessee company had debited interest and finance charges to the tune of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade interest payment of ₹ 48,32,133/- for investment of ₹ 52,13,26,800/- out of borrowed fund and, hence, an amount of ₹ 48,32,133/- is being disallowed out of total interest claimed. Therefore, he disallowed an amount of ₹ 48,32,133/- out of interest claim of the Assessee. Aggrieved, the Assessee carried the matter in appeal before the CIT(A). 5. Before the CIT(A), the learned AR of the Assessee submitted that the Assessee had own funds of ₹ 126.83 crores and investment made in equities and loans given to subsidiaries were only ₹ 108.75 crores. He further submitted that its own fund far exceeds the investment made and loans given to subsidiary companies. In this connection, the Assessee filed certific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n fund far exceeds the investment made and loans given to subsidiary companies. In this connection, the Assessee filed certificates of Chartered Accountants to prove that all borrowed funds were used for the business of the Assessee. Further, the Assessee relied on the decisions of the CIT(A) in the assessment year 2004-05 2005-06 to claim that similar additions made by the AO in those years were not upheld by the CIT(A). In this connection, we refer to the judgment of the Hon'ble jurisdictional High Court in the case of Reliance Utilities and Power Ltd. [2009] 313 ITR 340 (Bom.) held that if there were funds available both interest-free and overdraft and/or loans taken, then a presumption would arise that investments would be out of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... After hearing the learned DR and perusing the record, we find that this issue is covered by the Hon'ble jurisdictional High Court in the case of Godrej Boyce Mfg. Co. Ltd., [2010] 328 ITR 81 (Bom.) wherein the Hon'ble Court held as under: That the provisions of Rule 8D of the Rules which have been notified with effect from March 24, 2008, would apply with effect from assessment year 2008-09. Even prior to assessment year 2008-09, when Rule 8D was not applicable, the AO had to enforce the provisions of Sub-section (1) of Section 14A. For that purpose, the AO is duty bound to determine the expenditure which has been incurred in relation to income which does not form part of the total income under the Act. The AO must adopt a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 29,38,510/- on the foreign travel of its chairman Khalid Ansari and its Managing Director Mr. Tarique Ansari. The AO asked to explain as to how these expenses were incurred for the purpose of the business, in reply, the Assessee explained that all foreign travel were carried out by the employees of the Assessee, for which the Assessee produced all paper cutting where director of the Assessee company visited to give coverage to various events. The AO rejected the explanation and held that the Assessee had not given purpose of each foreign visit and the Assessee had not been able to correlate paper cutting with each foreign visit and the not filed evidence in the form of invitation of visit from the organizer of the events. The AO relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticular place in the world. The Appellant has undertaken foreign travel to cover important event in the world. This is evident from the published articles cannot be said to be not incurred wholly and exclusively for business purposes at least in the specific business of the Appellant. The fact should also not be ignored that the coverage of the events had helped the Appellant to maintain the circulation during the year under consideration. Thus, I do not find any cogent reason for which the impugned addition should be sustained in absence of any defect in the books of account to attract the provisions of Section 145 of the Act. There are clinching evidences to substantiate the claim of the Assessee. In accordance with the above discussion, ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
