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TMI Blog2011 (3) TMI 1440X X X X Extracts X X X X X X X X Extracts X X X X ..... (B) Whether the Appellate Tribunal was deleted the addition on account of provision of wealth tax while computing profit u/s. 115B of the Act in view of para No. 4 of Instruction No. 5 of 2008?" First question arises in following factual background. For assessment year in question, the assessee's return was processed under scrutiny assessment. The Assessing Officer found that the assessee had taken loans on various dates totaling to 3,83,44,651/- from Power Finance Corporation and paid interest of 17,31,926/-. The Assessing officer also found that during the year, the assessee had made investment earning tax free returns. The Assessing Officer therefore, desired to disallow the claim of deduction of interest on the borrowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from loan obtained from PFC and therefore, no portion of interest paid during the year can be allocated to the tax fee income received. It is submitted that as the loan was not obtained for investments in tax free securities provisions of Section 14Ais not applicable at all and no disallowance is required to be made." The Assessing Officer disallowed the deduction of interest of 17,31,926/- paid on the borrowed funds under Section 14A of the Act and added it back to the total income of the assessee. This issue was carried in appeal by the assessee. CIT(Appeals) accepted the assessee's explanation deleted the addition making following observations: "4. The facts of the case and arguments of the appellant have been considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the submissions of the assessee, held that the entire borrowed funds was utilized by the assessee for its business purposes and, therefore, the A.O. was not justified in disallowing the claim for deduction of interest for 17.31 lakhs to the assessee. We find that in the instant case it is not in dispute that the assessee has utilized its own funds for the purpose of making investment in shares, etc. from which tax free income were earned. It is also not in dispute that the interest bearing borrowed funds were utilized for its own business purposes from which taxable income were earned by the assessee. The only grievance of the A.O. is that, the assessee has arranged the above affairs in such a manner so as to reduce its tax liability. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d opinion the A.O.'s approach in the instant case was not justified. The nexus between the interest bearing fund ant interest free investment as claimed by the A.O. was not correct when it is not in dispute that the own funds were utilized for making tax free investment. Under these circumstances, we do not find any infirmity in the order of the Ld. CIT(A) which is confirmed and the ground of appeal of the Revenue is dismissed." We have heard learned counsel for the parties. Learned counsel Shri Manish Bhatt for the Revenue submitted that there was no demarcation in investment made by the assessee in earning tax free income, whether same was made from out of its own fund or from borrowed fund. In that view of the matter, Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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