TMI Blog2022 (2) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... direct nexus with the same. As on 31.03.1991, the assessee had share capital and reserves of more than ₹ 636.35 Lacs which have been invested in fixed assets and others and therefore, the same could not have been used for the purpose of making investment. However, the assessee had cash accumulations during first quarter of 1991 for ₹ 328.60 Lacs and therefore the investment made on 02.05.1991, to that extent, may be presumed to be made out of cash accumulations. The total investments made by the assessee stood at ₹ 1311.28 Lacs. Hence, the balance ₹ 418.08 Lacs of investment alone could be considered to be sourced out of borrowed funds. AR, in the written submissions, has stated that average cost of borrowing was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovide that where gross total income of a domestic company (recipient) includes any income by way of dividends from another domestic company then the recipient shall be allowed a deduction of an amount equal to so much of the amount of income by way of dividends from another domestic company as does not exceed the amount of dividend distributed by the recipient company. 2. Having heard rival submissions and after going through relevant material on record including the orders of lower authorities, our adjudication would be as under. The assessee being resident corporate assessee is stated to be engaged in providing financial services and merchant banking services. 3.1 The brief facts are the assessee was assessed u/s 143(3) on 24.02.199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whereas the investments increased by ₹ 97.24 Crores, entire own capital could not be said to have been invested in units and shares yielding dividend income for which the assessee claimed deduction u/s 80M. The onus was on assessee to establish direct nexus between own funds and investments made by the assessee. The assessee submitted that it commenced business activities during calendar year 1989. In that year, the assessee did not accept any deposits from the public and capital and reserves at year-end amounted to ₹ 600 Lacs which could be considered to have been utilized to make investments. 3.3 Regarding investment in Units of Unit Trust of India from which substantial dividend was earned, it was submitted that investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cost of ₹ 267 Lacs, proportionate interest may be disallowed and the balance dividend income may be exempted u/s 80M. 5. However, Ld. CIT(A) opined that in case of mixed funds, it could not be taken that the investments were out of interest free funds. The assessee was not able to link the share capital and reserves available with the investment. In such a case, the only course available would be to disallow proportionate expenditure. Therefore, the course adopted by Ld. AO was reasonable. Accordingly, the working was upheld against which the assessee is in further appeal before us. 6. After careful consideration of factual matrix as enumerated in the preceding paragraphs, the undisputed facts that emerges are that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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