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TMI Blog2006 (3) TMI 226X X X X Extracts X X X X X X X X Extracts X X X X ..... Rastogi, Advs. For the Respondent : P.V. Rao, Adv. ORDER P.M. Jagtap, A.M.: 1. This appeal is preferred by the assessee against the order of the learned CIT(A)-XVII, New Delhi, dt. 15th Nov., 2002, and its grievance is projected in the following grounds raised therein: "1. That the order is against the law and facts of the case; 2. That the learned CIT(A) was not justified in confirming addition of Rs. 6,86,81,751. Income from these infrastructure projects is covered under s. 10(23G) of the IT Act. It is prayed that the addition of Rs. 6,86,81.751 may be deleted; 3. That the learned CIT(A) was not justified in disallowing the amount of Rs. 4,64,338 towards provision made in earlier years now reversed; 4. That the learned CIT(A) was not justified in estimating the expenditure attributable to exempt income @ 1 per cent of the total exempt income." 2. Ground No. 1 raised by the assessee in this appeal is general, seeking no specific decision from us. 3. At the time of hearing before us, the learned counsel for the assessee has not pressed ground Nos. 2 and 3 stating that the C.O.D. has not given its approval to agitate these grounds. Accordingly, these grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e material available on record in this regard. In view of the nature of business of a banking company, the action of the AO in disallowing the expenses on proportionate basis cannot be upheld. As explained by the appellant-bank in their submissions, deposits are raised by the bank as part of its banking business and based on the extent of deposits, the banks are required to make advances to achieve highest possible credit deposit ratio. Out of the deposits so raised, certain percentage is required to be invested in securities or various instruments in accordance with RBI guidelines. No deposits are raised by the bank for the purpose of investment. Investment follows the requirements of the guidelines issued by the RBI. Therefore, it cannot be said that deposits have been raised by the bank for investing in tax-free bonds, etc. Thus, there is no reason for disallowing interest on proportionate basis. On the other hand, the explanation of the appellant-bank that the administrative expenses of the investment department on proportionate basis only should be disallowed can also not be accepted because it cannot be accepted that the appellant-company had incurred an expenditure of Rs. 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me thereon. 6. Without prejudice to the aforesaid contentions, the learned counsel for the assessee also submitted that even if some disallowance under s. 14A is required to be made, the same should be made in respect of expenditure incurred by the assessee on investment being on proportionate basis and the other expenses incurred mainly on the running of various branches could not be considered for making the said disallowance. 7. The learned Departmental Representative, on the other hand, contended that the language of s. 14A is very clear and the disallowance of expenses attributable to the income which is exempt from tax is liable to be made irrespective of the relevant head of income and the other aspects such as real intention, head of income, etc. are irrelevant to make such disallowance. In support of this contention, she has relied on the decision of Calcutta Bench of the Tribunal in the case of Dy. CIT vs. S.G. Investment & Industries Ltd. (2004) 84 TTJ (Kol) 143 : (2004) 89 ITD 44 (Kol); Mumbai Bench of the Tribunal in the case of Asstt. CIT vs. Dakshesh S. Shaw (2004) 90 ITD 519 (Mumbai) and Ahmedabad Bench of the Tribunal in the case of Harish Krishnakant Bhatt vs. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness income in the nature of dividend is not includible in the total income by virtue of the same being exempted under s. 10(33), and as such it is not understood as to why the interest incurred to the extent it is capable of being regarded as expenditure in relation to part of the business income in the nature of dividend should not be adjusted against exempted dividend income. The extent of benefit allowed by the Parliament for dividend income is an amount, which is required to be calculated with reference to the net dividend. It is not possible to suggest that an assessee has, by reason of being a dealer in shares or holding the shares as trading assets, an option not available to other assessees also deriving income from dividends out of shares held as investment, to deduct the interest paid on the amount borrowed for investing in shares for which dividend is earned as expenditure in relation to his business under s. 36(1)(iii). It is common knowledge that no dividend could be earned without making investments as the dividend could have been earned only after investments are made. When it is found that investment in shares are made out of borrowed capital, it is then not und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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