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TMI Blog2010 (11) TMI 617X X X X Extracts X X X X X X X X Extracts X X X X ..... s a party - Therefore decided against of assessee. Interest on borrowing - Find the assessee company has started borrowings from 27.12.1997 onwards whereas the scrips on which tax free dividend income earned were purchased much prior to the same - find similar issue had come up before the Tribunal in assessee's own case for Assessment Year 2001-01 and the Tribunal decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... ain the allowability of these expenses. It was explained by the assessee that the company has received dividend of Rs.1,01,21,075/- on shares of Reliance Industries Ltd, Reliance Capital Ltd and UTI units 1964. All these shares were purchased during the earlier years. The company has not invested any amount during the relevant previous year in any of the shares mentioned above on which dividend income was received. Further, dividend warrants are en-cashable at par and the earning of dividend income is incidental to holding of the shares. It was submitted that the expenses charged to the P and L account are mainly in the nature of financial and administrative expenses incurred for the purpose of carrying on the business. The investment givin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are in appeal here before us with the following grounds: ITA No.5069/Mum/2003 (By the Revenue)ITA Revenue): "On the facts and in the circumstances of the case and in law the CIT(A) has erred in directing the Assessing Officer to apportion the interest in the ratio of investment on which dividend is earned to the total investment, without appreciating the facts discussed in the assessment order and has thus erred in reducing the interest disallowable from Rs.69.71 lacs to Rs. 6.98 lacs increasing the exemption available u/s 10(33)" ITA No.5145/Mum/2003 (By the Assessee)ITA Assessee): "1. The order passed by the CIT(A) is illegal, bad in law, ultra vires and contrary to the provisions of law and facts of the case and without appreciatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , he submitted that the assessee has received dividend of Rs.1,01,21,075/- from Reliance Industries Ltd (Rs.85,86,956/0), Reliance Capital Ltd (Rs.15,04,303/-) and UTI, Unit 1964 at (Rs.29,816/-). 4.1 Referring to page 12 of the paper book, he submitted that scrips of Reliance Industries Ltd were purchased during the period from 31.3.1990 to1.4.1996. Similarly, scrips of Reliance Capitals Ltd were purchased during the period from 29.10.1990 to 29.3.1995 and the UTI-Units 1964 were purchased on 21.12.1994. 4.2 Referring to page 13 of the paper book, he submitted that the company has started borrowings from 27.12.1997 which is much after the purchase of scrips of Reliance Industries Ltd, Reliance Capitals Ltd and UTI - Units 1964. 4.3 R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich one of us (Accountant Member) is a party. We, therefore, do not find any infirmity in the order of the CIT(A) in upholding the disallowance of Rs.1 lakh out of the administrative expenses made by the Assessing Officer u/s 14A of the Act. Accordingly, the ground raised by the assessee on this issue is dismissed. 6. So far as the ground raised by the assessee and the revenue are concerned regarding the order of the CIT(A) in restricting the disallowance of Rs.6.98 lakhs as against Rs.69.71 lakhs disallowed by the Assessing Officer, we find the assessee company has started borrowings from 27.12.1997 onwards whereas the scrips on which tax free dividend income earned were purchased much prior to the same. We find similar issue had come up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and the rounds raised by the assessee are partly allowed." 7. Since admittedly, all the shares on which dividend income was earned and claimed as exempt were purchased much prior to the amounts borrowed by the assessee; therefore, in view of the decision of the Tribunal in assesse's own case and in absence of any contrary material brought to our notice, no part of the interest in our opinion can be disallowed u/s 14A of the I T Act. Accordingly, we set aside the order of the CIT(A) and direct the Assessing Officer to delete the disallowance of interest expenditure u/s 14A of the I T Act. The ground raised by the assessee is accordingly allowed and the ground raised by the revenue is dismissed. 8. In the result, the appeal filed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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