TMI Blog2011 (5) TMI 1142X X X X Extracts X X X X X X X X Extracts X X X X ..... r on account of interest on investment in the shares of Lakhani India Limited under section 14A of the Income Tax Act, 1961 particularly when the investment in shares which yield dividend income are not forming part of the total income by virtue of section 10(34) of the Income Tax Act, 1961 and hence, since dividend does not form the part of total income and when the financial burden incurred by the assessee for acquiring shares should have been proportionately disallowed by invoking section 14 of the Income Tax Act, 1961. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred on facts and in law in deleting the addition of Rs.3,25,674/- made by the Assessing Officer on account of interest on debit balance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osite business expenditure incurred towards tax-free income could not be disallowed and incorporates an implicit theory of apportionment of expenditure between taxable and non-taxable income. Once a proximate cause for disallowance is established which is the relationship of the expenditure with income which does not form part of the total income a disallowance u/s 14A has to be effected; (3) The argument that a literal interpretation of s. 14A leads to absurd consequences is not acceptable. S 14A is founded on a valid rationale that the basic principle of taxation is to tax net income i.e gross income minus expenditure; The CIT (A) in this case has granted the relief to the assessee on the basis of the decision of Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k out the disallowances on reasonable basis. 4. In the ground no.2, the issue involved is regarding the deletion of addition of Rs.3,25,674/- on account of interest on debit balance of partners u/s 36(1)(iii) of the Income-tax Act, 1961. 5. We have heard both the sides and after hearing and considering the facts of the case, we find that the CIT (A) has granted the relief on the basis of decision of Hon'ble Punjab Haryana High Court, i.e. the jurisdictional High Court in the case of Abhishek Industries Limited reported in 286 ITR 1 (P H). Further, we find that there is overall increase in the capital from the partners and no interest has been debited on the credit balance of the partners in the books of accounts of the firm. Fur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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