TMI Blog2020 (11) TMI 260X X X X Extracts X X X X X X X X Extracts X X X X ..... lable with the assessee - In view of the huge funds available with the assessee without any interest liability, we find that the issue is squarely covered in favour of assessee. Enhanced disallowance u/s. 14A r.w.r. 8D - CIT(A) has enhanced the disallowance stating that borrowed funds were directly related to the investment made for earning exempt income - HELD THAT:- As perused the decision of Reliance Utilities Power Ltd. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT ] wherein it is held that 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 investment were from the interest free funds available. The assessee had demonstr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t return of income declaring income of ₹ 12,02,23,628/- was filed on 9th Sep, 2014. The case was subject to scrutiny assessment and notice u/s. 143(2) was issued on 28th August, 2015. The assessment u/s. 143(3) was finalized on 26th June, 2016. The relevant facts of the case are discussed while adjudicating the grounds of appeal filed by the assessee as under:- Ground No. 1(Disallowance of interest expenses of ₹ 6,59,425/- 4. During the course of assessment, on verification of the details of interest paid and interest received on loan and advances, the Assessing Officer noticed that assessee has not charged any interest in respect of advances of ₹ 41,50,000/- given to Ami Bhargav Shah. On query, the assessee expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. On the other hand, the ld. Departmental Representative has supported the order of the lower authorities. 7. Heard both the sides and perused the material on record. It is undisputed facts that assessee was having substantial amount of interest free funds of ₹ 25.6 crore as against amount of loan advanced of ₹ 41.05 lacs. With the assistance of the Ld. representatives, we have gone through the decision of the Co-ordinate Bench placed in the paper book on the identical issue and facts adjudicated in the case of the assessee vide ITA No. 1563/Ahd/2013 dated 16/12/2016 wherein the Co-ordinate Bench has held as under:- 6. The Ld. AR for the assessee Mr. Parin Shah submitted that out of total advance of ₹ 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r any interference. 8. We have carefully heard the rival submissions and perused the orders of authorities below. At the outset, we note that the interest free own funds available at the disposal of the assessee stands at. ₹ 352.91 lakhs as on 31/03/2008 and ₹ 507.94 lakhs as on 31/03/2009. The corresponding interest-free advance as on 31/03/2009 stands at ₹ 21.10 lakhs. In such a situation, where interest-free own funds available to the assessee are far in excess of the interest-free advance, the presumption would arise in favour of assessee that the advances were made from interest-free funds available with the assessee. On this issue, we find guidance from the judgment of Hon'ble Bombay High Court in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee and computed the disallowance u/s. 14A r.w.r. 8D to the amount of ₹ 1,54,816/-. 9. The assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has enhanced the amount to the amount of disallowance to ₹ 14,36,931/-. The ld. CIT(A) was of the view that assessee has utilized overdraft to make investment in the shares, therefore, the interest amounting to ₹ 14,86,246/- was held as expenses exclusively laid out for earning exempt income after reducing the already offered sum of ₹ 49,315/- as interest expenses. 10. During the course of appellate proceedings before us, the Ld. counsel has contended that assessee was having substantial interest free funds as against meagre investment on which d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts that it was having substantial amount of interest free funds of ₹ 25.67 crores as against investment of ₹ 2.70 crore. Considering the above facts and findings, we are not inclined with the decision of Ld. CIT(A), however, we consider that incurring of administrative expenses i.e. cost of employee, office expenses etc. to manage the investment cannot be ruled out therefore we restrict the disallowance to the extent of administrative expenses of ₹ 85,923/- as computed by the Assessing Officer. Accordingly, this ground of appeal of the assessee is partly allowed. 12. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 09-10-2020. - - TaxTMI - TMITax - Income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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