TMI Blog2019 (4) TMI 1039X X X X Extracts X X X X X X X X Extracts X X X X ..... nce under Section 14A could not have been made. The facts are similar in the present case. The Tribunal therefore, correctly deleted the disallowance in three out of four assessment years and restricted the same in forth year to the extent the investments exceeded the interest free funds. Learned counsel for the Department however submitted that the assessee failed to demonstrate that in the present year only interest free funds were diverted for making tax free investment. In our opinion assessee was not expected to establish the same. Once the presumption that the interest free funds were utilized for making exempt investment, it would be for the revenue to establish to the contrary which in the present case has admittedly not been don ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tax Appellate Tribunal ( Tribunal for short). Following questions have been presented for our consideration: a. Whether on the facts and in the circumstances of the case and in law, ITAT was justified in deleting the disallowance made u/s 14A of ₹ 16.76 lakhs ignoring the fact that the assessee failed to demonstrate the exact availability of the interest free funds available in hand at the time of making the said investments? b. Whether on the facts and in the circumstances of the case and in law, ITAT was justified in treating the Bonus Shares as investments with a cost of acquisition of Rs.Nil for the Year under consideration, ignoring the fact that the original shares, for which bonus shares were allotted, were presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s only and once that is so, then no disallowance of interest should be made. As can be seen from the chart incorporated above, for the AYs 2006 07, 2008 09 and 2009 10, there are excess of interest free/surplus funds over the investments, therefore, no interest disallowance should be made under section 14A for the assessment years 2006 07, 200809 and 2009 10 should be made. We order accordingly. 4. In relation to the assessment year 2007 08, giving rise to the Income Tax Appeal No.1504 of 2017 filed by the revenue, the Tribunal restricted the disallowance by making following observation : 10. So far as disallowance of interest under section 14A for the assessment year 2007 08 is concerned, we find that amount of ₹ 11,67,88, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter referring to the decision in case of Reliance Utilities and Power Ltd. (supra) the Court observed that the Tribunal had come to the factual finding that the assessee had its own funds and that such non interest bearing funds were in excess of investments in tax free securities. In such circumstances, the Court held that disallowance under Section 14A could not have been made. 7. The facts are similar in the present case. The Tribunal therefore, correctly deleted the disallowance in three out of four assessment years and restricted the same in forth year to the extent the investments exceeded the interest free funds. Learned counsel for the Department however submitted that the assessee failed to demonstrate that in the present yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stock and not investment stock due to the basis origin of the shares being trading stock. (ii) Therefore when the BONUS shares are sold, the character of the same remains the same i.e. Trading stock. 9. The Tribunal by the impugned judgment held in favour of the assessee by referring to and relying upon the judgment of the Supreme Court in case of Commissioner of Income Tax, U.P. Vs. Madan Gopal Radhey Lal Vol.73 ITR 652. 10. In this respect, the counsel for the revenue submitted that the assessee was holding the shares by way of stock in trade. When the company declared bonus shares which the assessee received, it claimed that the shares were held as investment. Counsel submitted that this was a colourable device applied b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence was made by the Tribunal) in Commissioner of Income tax v. Maniklal Chunnilal and Sons Ltd. (I.T. Reference No.16 of 1948) that bonus shares received by a shareholder who carries on business in shares and securities ipso facto become accretion to his stok in trade. Bonus shares would normally be deemed to be distributed by the company as capital and the shareholder receives the shares as capital. The bonus shares are accretions to the shares in respect of which they are issued, but on that account those shares do not become stock in-trade of the business of the shareholder. A trader may acquire a commodity in which he is dealing for his own purposes and hold it apart from the stock-in trade of his business. There is no presumption ..... X X X X Extracts X X X X X X X X Extracts X X X X
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