TMI Blog2018 (9) TMI 1243X X X X Extracts X X X X X X X X Extracts X X X X ..... re of the view that the assessee had explained the sources of the advances and investments made to the subsidiaries, which could not be linked to the borrowed funds and that the advances were made out of the assessee's own capital. At the relevant time the assessee was found to be having an adequate non-interest bearing fund by way of share capital and reserves. See Bharti Televenture Ltd.[2011 (1) TMI 326 - DELHI HIGH COURT]. Addition made u/s 14A of the Act r.w.r 8D - Held that:- The undisputed fact is that there is no exempt income earned by the assessee during the year under consideration. As in the case of Shivam Motors Pvt. Ltd [2014 (5) TMI 592 - ALLAHABAD HIGH COURT] have categorically held that if there is no exempt income earne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 60.10 crores. The Assessing Officer was of the opinion that the funds so advanced are interest bearing in nature for which the assessee has paid total finance charges of ₹ 2.96 crores. The assessee was asked to show cause as to why not proportionate interest be disallowed in this respect. 5. The assessee filed a detailed reply dated 19.12.2012 which did not find favour with the Assessing Officer who proceeded by disallowing a sum of ₹ 2.96 crores in assessment year 2010-11, ₹ 1.46 crores in assessment year 2011-12 and ₹ 56.84 lakhs in assessment year 2012-13. 6. The assessee carried the matter before the ld. CIT(A) and explained that the total interest free funds available with the assessee were far mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statement. It is the say of the ld. DR that the order of the first appellate authority deserves to be set aside and that of the Assessing Officer should be restored. 9. Strongly rebutting to the submissions made by the ld. DR, the ld. counsel for the assessee stated that the Assessing Officer himself has considered the year end figure for making proportionate disallowance. It is the say of the ld. counsel for the assessee that the issue of commercial expediency was never raised by the Assessing Officer and, therefore, the ld. DR cannot improve the assessment order by raising the issues which are not emanating from the assessment order. The ld. AR drew our attention to the availability of interest free funds and once again stated that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as, in those cases, the disallowances, vis a vis claims, were on the grounds of commercial expediency, which is absent in the case in hand. 12. The Hon'ble Jurisdictional High Court of Delhi in the case of Modi Rubber 378 ITR 128 had an occasion to consider a similar issue of availability of interest free funds, vis a vis, lending of interest free advances. The relevant findings of the Hon'ble High Court read as under: From a perusal of the financial statements for the year ended September 30, 1997, it was seen that the assessee was having mixed pool of funds comprising own funds and loan funds. It was held that in such a situation where the one to one nexus between the borrowed funds and the loan advanced to Modi Stone Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellate authorities below were of the view that the assessee had explained the sources of the advances and investments made to the subsidiaries, which could not be linked to the borrowed funds and that the advances were made out of the assessee's own capital. At the relevant time the assessee was found to be having an adequate non-interest bearing fund by way of share capital and reserves. 14. The Hon'ble High Court further held as under: We are in entire agreement with the findings recorded by the Commissioner of Income-tax (Appeals) as also by the Income-tax Appellate Tri-bunal in all the three cases and do not find any ground to interfere with those findings . 15. Similar view was taken by the Hon'ble High Court of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when read with CBDT Circular the disallowance so made by the Assessing Officer should be sustained. 22. We have carefully considered the orders of the authorities below. The undisputed fact is that there is no exempt income earned by the assessee during the year under consideration. The Special bench decision on which the Assessing Officer relied for making the disallowance has been reversed by the Hon'ble High Court of Delhi in Cheminvest Ltd. 281 CTR 447. The Hon'ble High Court of Gujarat in the case of Corrtech Energy [P] Ltd. 272 CTR 262 and the Hon'ble Allahabad High Court in the case of Shivam Motors Pvt. Ltd [All] 272 CTR 277 have categorically held that if there is no exempt income earned by the assessee during the ye ..... X X X X Extracts X X X X X X X X Extracts X X X X
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