TMI Blog2022 (3) TMI 1121X X X X Extracts X X X X X X X X Extracts X X X X ..... LP in the form of partner s capital; and, since there was no exempt income received by the assessee during the year under consideration as share of profit from the said firm which was exempt from tax and the interest earned by the assessee from the said firm was offered for tax after deducting the interest paid, it was a case where the assessee had actually earned net interest income. As pointed out for the assessee from the income and expenditure account of the assessee for the year under consideration, no deduction on account of any other expenditure was claimed by the assessee - we are of the view that the disallowance made by the Assessing Officer under Section 14A read with Rule 8D, as sustained by the learned CIT(A), is not justifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Rule 8D should not be made on account of interest and other expenses which were incurred in relation to earning of exempt income. In this regard, it was explained by the assessee that his own funds, available in the form of capital, were to the tune of ₹ 13.18 crores which were sufficient to make the investment in various mutual funds and shares. It was also submitted by the assessee that interest expenditure to the extent of ₹ 32,79,498/- was incurred in respect of funds borrowed from Bajaj Finance Ltd. which were utilized for capital contribution in the partnership firm Varsha Fashion LLP and the interest paid was claimed as deduction from the interest earned from the said LLP. It was contended that there was no utilizatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce viz under Rule 8D(2)(i)-Nil, 8D under Rule 8D(2)(ii) - ₹ 15,20,769/- and under Rule 8D(2)(iii) - ₹ 3,95,536/-. As per assessment order appellant has earned exempt income of ₹ 4,18,543/-. This fact is also mentioned in statement of facts filed by the appellant on record. Undisputedly, appellant has not made any suo-motu disallowance u/s 14 A r.w. rule 8D in its books. The only effective ground to oppose the addition is availability of own surplus fund for the investment in mutual fund, share, from which exempt income was earned. AR has submitted extract of capital vis-a-vis investment made therein and tried to justify that loan availed from Bajaj Finance Ltd of ₹ 4,50,00,000/- during FY 2012-13 was invested in M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce his plea of availability of own surplus fund for making investment in shares mutual fund. Clearly, borrowed fund has been used tor earning exempt income and I have already discussed these facts more than enough to prove it. Therefore, AR's plea against invoking Sec. 14A is not correct. I am fully with the AO in invoking Sec. 14A of the Act. Thus, AR's argument is rejected. 6.3 Coming to another argument specifically reliance placed on the order of the SC in case of Reliance Petroleum Ltd, I have already discussed that appellant lacked surplus fund for investment generating exempt income. Apparently, appellant has not denied investing in Varsha Fashion and also in mutual fund capable of generating exempt income. So, thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has preferred this appeal before the Tribunal. 5. We have heard the arguments of both the sides and also perused the relevant material available on record. The learned Counsel for the assessee has invited our attention to the balance-sheet of the assessee as on 31.03.2014 placed at page nos. 12-13 of the paper-book to show that sufficient funds, in the form of own capital of ₹ 13.17 crores and interest free loans of ₹ 3.49 crores, were available with the assessee at the relevant time to make investment in mutual funds and shares. He has also submitted that the interest bearing funds, on the other hand, were utilized by the assessee mainly for making investment in the partnership firm Varsha Fashion LLP as partner s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x and the interest earned by the assessee from the said firm was offered for tax after deducting the interest paid, it was a case where the assessee had actually earned net interest income. Moreover, as pointed out by the learned Counsel for the assessee from the income and expenditure account of the assessee for the year under consideration, no deduction on account of any other expenditure was claimed by the assessee. Keeping in view all the facts and circumstances of the case, which have remained unrebutted and uncontroverted by the learned Departmental Representative, we are of the view that the disallowance made by the Assessing Officer under Section 14A read with Rule 8D, as sustained by the learned CIT(A), is not justified and deletin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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