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TMI Blog2012 (3) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... aneja and Ms.Rani Kiyala, Advocates. SANJIV KHANNA, J: (ORAL) This appeal pertains to the assessment year 2001-02 and is directed against the order dated 5th December, 2008 passed by the Income Tax Appellate Tribunal (tribunal, for short). Three separate issues are raised in the present appeal and they have been discussed under three separate headings. ISSUE NO. 1 Valuation of Closing Stock 2. Three substantial questions of law are framed:- 1. Whether on the facts and circumstances of the case the Income Tax Appellate Tribunal was correct in law and on facts in deleting the addition made by Assessing Officer on account of rejection of method of valuation of closing stock as followed by the assessee ? 2. In case the answ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... involved in relation to the exempt income was on deposit of cheques and therefore no apportionment of expenditure was necessitated. It was further stated that sometimes dividend/interest was credited electronically. The assessee had pleaded that expenditure incurred and shown in profit loss did not have any direct nexus with the exempt income earned and there was no commission or remuneration paid to a banker or any other person for realizing dividend or tax free bond interest. 7. The Assessing Officer, however, did not accept the said contention, inter alia, observing as under:- The assessee has shown total receipt of Rs.165,62.72 lakhs which inter alia comprises of income of Rs.188.34 lakhs from tax free bonds/mutual funds. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Administrative expenses (Rs.5,99,44,162/-) Total Receipts 1,65,62,72,129/- Exempted Receipts 1,88,34,820/- Administrative expenses allocated to exempted income = 59944162 x 18834820/- =6,81,673/- (B) 1656272129/- Total (A+B) = 1,02,33,809/- Thus, disallowance of administrative and interest expenses of Rs.1,02,33,809/- is made u/s 14A. 8. The aforesaid findings were challenged by the respondent/assessee in appeal. A specific plea was taken that borrowed funds were not utilized for the purpose of purchase of units in the mutual funds or for earning tax free dividend income or for the purchase of units of UTI 64 that had resulted in issue of tax fre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs.95,52,136/-. The Tribunal went into the question of deletion of Rs.95,52,136/- and has recorded the following findings:- Coming to the facts of this case, it is quite clear the no amount was borrowed at the beginning of the year and, thus, it cannot be said that any borrowed funds were used for investment in bonds or shares held at the beginning of the year. The borrowings amounted to Rs.9,60,32,563/- at the end of the year. The case of the learned counsel was that this amount represented internal accruals by way of profits and also sale proceeds of similar investments. This case could not be rebutted by the learned DR. The finding of the learned CIT(A), on basis of the certificates from the banks, was that no part of the interest c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port of sugar and could not be used for any other purpose. Thus on the said aspect no order of remit is required and necessary. We may notice here that as far as administrative expenses is concerned, the matter has been remitted back to the Assessing Officer. On remand, when the Assessing Officer examines the said aspect, he can and will have right to take into account all other expenses and consider whether there was any direct or indirect nexus with the earning of the exempted income, but he shall not be examine the interest expenditure in question. Issue No. 3 Interest under Section 234 D 11. Another issue raised by the Revenue pertains to charging of interest u/s 234D. The assessment year in question is 2001-02. This question is c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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