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TMI Blog2012 (8) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment order & the balance sheet duly certified by the Chartered Accountants it is evident that the assessee’s capital as on 01-04-2005 was Rs.96,58,043/- and as on 31-03-2005 was Rs.1,14,64,439 clearly established that the investment made by the assessee earning exempt income u/s 10(34) being either Rs.60,78,419/- or Rs.80,56,190/- flows from the own funds of the assessee being Rs.1,14,64,439/- as on the date of such investment - In such circumstances, disallowance u/s 14A made by the AO is not warranted because the assessee had made the investments from his own funds viz. “Own Capital” and not from the “interest bearing funds” - in favour of assessee. Addition on account of agricultural income - CIT(A) deleted the addition - Held that: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.7,46,308 outstanding at the end of March 06 have been shown as bad debts written off when the debt was not sufficiently old. 2. The Ld. CIT(A) further erred in the facts and in the circumstances in deleting the addition of Rs.10,67,445/- on account of interest u/s 14 A of the Act without appreciating the fact that the assessee was having fresh capital of only Rs.18,06,396/- against which the investment shown is Rs.63,29,052/- 3. The ld. CIT(A) further erred in the facts and in the circumstances in deleting the addition on account of agricultural income to the tune of Rs.2,56,000/- without appreciating the fact that the assessee failed to give evidence regarding the agricultural expenses to the tune of the above amount, irrespective of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be bad and irrecoverable. The assessee carried the matter before the learned CIT(A). After considering the rival submissions, the learned CIT(A) deleted the addition with the following observations: 7.3 I have gone through the written submission made by the learned Counsel from which it can be seen that the assessee as well as earlier her sister concern has received an amount from this party worth Rs.1,00,64,392/- and out of this, both the concerns have earned discount charges/interest of Rs.1,09,080/-, and as such, it is seen that the assessee was dog the business with this party since 01.04.2001 and if the total transaction is to be considered then only 10% of the bad debt has been claimed in this year. 7.3.1 In view of this find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Schedule VI of the balance sheet filed by the assessee it was observed by the learned AO that the assessee had made investments in shares and securities amounting to Rs.1,49,73,398/- and earned a dividend income of Rs.6,63,600/- being exempt income u/s 10(34) of the Act. It was also found that the assessee had made a borrowing of Rs.15,98,923/- as secured loan and an amount of Rs.1,87,24,503/- as unsecured loan aggregating to Rs.2,03,23,426/-. On this borrowing the assessee had paid interest amounting to Rs.30,03,876/-. The learned AO further observed that the assessee had made average investment in the in this previous year and before amounting to Rs.1,18,09,133/- since the opening investment was Rs.1,49,73,398.61 and the closing inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 471 (page 478) (c) Keshavji Ravji Co. Vs CIT (1990) 183 ITR 1 (d) Hero Cycles Vs CIT, 20 DTR 213 (Chd.) (e) S. R. Bommai Vs Union of India, AIR (1994) SC 1918 H 1969 and 1970 CONCLUSION 8.3.8 In view of the aforesaid judicial pronouncement and by way of taking support from them, I believe that the assessee has proved that the interest expenditure incurred is manly on account of and with a motive to earn interest income. The borrowing has also been made with a motive to earn more interest income, and in fact, the assessee has shown net interest income, as shown above. In view of the judicial pronouncements abstracted earlier, I found that the words in relation to cannot be interpreted like in reference to . Since the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of the learned CIT(A) it is evident that the assessee had made investment of Rs.60,78,419/- earning income exempt from tax. This fact is not disputed by the revenue before us. Further, the finding of the learned AO categorically states that out of the allocated borrowings, an amount of Rs.80,56,190/- was invested in investments, income from which is exempt from tax. Further, from the chart imbedded in the assessment order extracted herein above and from the balance sheet duly certified by the Chartered Accountants placed in page 64 of the paper book of the assessee it is evident that the assessee s capital as on 01-04-2005 was Rs.96,58,043/- and as on 31-03-2005 was Rs.1,14,64,439/-. The same is not disputed by the revenue. Thus, from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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