TMI Blog2012 (9) TMI 1152X X X X Extracts X X X X X X X X Extracts X X X X ..... ej Shah, learned counsel for the assessee. The crux of arguments on behalf of the Revenue is that the assessee made investment in shares out of loan taken from bank, therefore, section 14A is applicable by further submitting that res-judicate is not applicable to income-tax proceedings, therefore, the assessment order was strongly defended. The learned Senior DR placed on the decision on 339 ITR 296 (Ker); 339 ITR 319 (Cal) and 302 ITR 218 (P H). On the other hand, the learned counsel for the assessee, Shri Tej Shah, strongly defended the impugned order by submitting that the cases relied on by the Revenue are on different facts and the assessee has not shown such income as exempt income especially when huge funds were available in the capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital gain of ₹ 26,07,611/-. The Revenue has challenged the addition of ₹ 44,15,229/- which was deleted by the learned CIT(A) on account of disallowance made u/s 14A of the Act. Before adverting further, we are reproducing hereunder the relevant observations/conclusion of the learned CIT(A) :- 3.2 Ground no. (3):- Through this ground, the assessee has challenged the disallowance of interest paid to bank amounting to ₹ 44,15,229/-. On this issue, it is pointed out that assessee had earned interest on amount given to the companies as well as on FDRs totalling to ₹ 59,44,945/-. This fact is verifiable from the profit and loss account. The A.O. has considered the entire amount of interest paid to the bank for disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business carried on by her. Apart from the investment in shares, there was nothing to indicate that the assessee s business was fully linked with the business of that company. The whole transaction was a total fiasco and the assessee received a major dividend income of ₹ 3 lacs. In those circumstances, it was held that the assessee was not entitled to deduction of any amount towards interest. It is pertinent to mention here that there was a finding by the Tribunal for disallowance of ₹ 2 lacs which fairly applied to the whole of the interest paid on borrowed funds as the entire funds were utilised for acquisition of shares by the assessee whereas there is a categorical finding in the impugned order that Assessing Officer conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee had interest free funds of its own and in terms of balance sheet, there was availability of funds including from share capital. The question before the Hon ble Court was whether if funds are available both interest free and overdraft and/or loans taken then a presumption would arise that investment would be out of interest free funds generated or available with the company. It was held in affirmative. The relevant portion as contained in para 10 is reproduced hereunder :- 10. If there be interest free funds available to an assessee sufficient to meet its investment and at the same time the assessee had raised a loan it can be presumed that the investments were from the interest free funds available. In our opinion the Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany, if the interest free funds were sufficient to meet the investments. In this case this presumption is established considering the finding of fact both the CIT(Appeals) and ITAT. 11. Considering the above, in our opinion, there is no merit in this appeal which is accordingly dismissed. 4.2 So far as the application of rule 8D is concerned, it was notified with effect from 24.3.2008, meaning thereby, shall apply with effect from A.Y. 2008-09. Even prior to assessment year 2008-09, when 8D was not applicable, the Assessing Officer had to enforce provisions of sub-section (1) of section 14A and for that purpose, the Assessing Officer was duty bound to determine expenditure which had been incurred in relation to income which did no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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