TMI Blog2018 (10) TMI 1957X X X X Extracts X X X X X X X X Extracts X X X X ..... y case factual aspects of the other years are not available except that no such disallowances u/s.14A had been made in the other years. However, in the year under consideration, AO applied provisions of section 14A and disallowed the total interest charged on the debit balance of the capital accounts. In this regard, another aspect is the total interest free funds available as per Balance Sheet were 11.62 Crore and tax free investments and plea of the assessee was that no disallowance is called for in view of the ratio laid down in the case of HDFC Bank Ltd. [ 2014 (8) TMI 119 - BOMBAY HIGH COURT] Applying the said principle, no disallowance is to be made under section 14A - Accordingly, ground of appeal No.1 raised by the assessee is allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance of interest expenditure amounting to Rs.32,05,320/- made by the learned AO, u/s. 14A of the ITA, 1961 r.w.r. 8D of the IT Rules,1962. The learned IT authorities ought to have appreciated that there is no nexus between interest expenditure and exempt income earned i.e. share of profit from partnership firms, and the investments in partnership firms are made out of own capital. 2. The learned CIT(A) erred in law and on facts in sustaining the ad-hoc disallowance of interest expenditure of Rs.2 lacs made u/s. 57 of the ITA, 1961 made by the learned AD on the analogy that the interest charged on loans given is less than the interest paid on loans taken. The IT authorities ought to have appreciated the realities of the situati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r dated 18.12.2012. However, the Assessing Officer held that under section 14A of the Act, it is provided not to allow deduction in respect of any expenditure exclusively incurred by the assessee in relation to exempt income. The plea of the assessee that there was no nexus between interest paid and the share of profit from the firms as it was not incurred towards earning exempt income from the partnership firms, was not accepted. The Assessing Officer also computed interest free funds available excluding investment in fixed assets, current assets of the assessee and noted that assessee had made investment in firms at Rs.5.47 Crores, investment in equity shares at Rs.2.16 Crores which was much higher than the interest free funds at Rs.1.07 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wever, assessee had charged interest on advances given in 4 cases out of 18 cases only. Thus, in the present case, excess claim of interest of Rs. 2,00,000/- out of total interest of Rs.38,56,312/- claimed u/s.57 of the Act was disallowed and added back in the income of the assessee. 7. The CIT(A) upheld the order of Assessing Officer by confirming both the additions in the hands of assessee against which, the assessee is in appeal before the Tribunal. 8. In response to the disallowance made u/s.14A of the Act, Ld. AR for the assessee has drawn my attention to the computation of income for the year under consideration and pointed out that assessee s share of profits of the firms was already subjected to tax at the partnership level, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come from which was exempt from tax. Hence, provisions of section 14A of the Act were attracted and the Assessing Officer disallowed the total interest. The case of the assessee has two folds. The case of the assessee was that no disallowance was to be made on account of interest expenditure as the amount was invested in partnership firms, not for earning share of profits which in any case was earned irrespective of the investment made. He further pointed without prejudice basis, that the Assessing Officer has not applied the provisions of Rule 8D of the IT Rules correctly. He also stressed that on similar circumstances, no disallowance was made in A.Ys. 2009-10 and 2013-14 vide orders passed under section 143(3) of the Act. Though Rule of ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
