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TMI Blog2013 (5) TMI 611X X X X Extracts X X X X X X X X Extracts X X X X ..... rs have been utilized for making investment in shares which has generated exempt income and thereby raised the issue of disallowance u/s 14A. In the light of these undisputed facts of CIT(A) had held that this was not a fit case in which provisions of section 14A were attracted placing reliance on the decision of CIT vs. M/s Lubi Submersibles Ltd [2011 (7) TMI 519 - Gujarat High Court] wherein held that there was a sufficient surplus fund available with the assessee to invest and there was no nexus that could be established with the expenditure incurred by the assessee for earning the dividend income. In favour of assessee. - ITA No. 2417/Ahd/2012 - - - Dated:- 10-5-2013 - Shri D. K. Tyagi And Shri A. Mohan Alankamony,JJ. For th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore disallowed an amount of Rs. 12,91,009/- by applying the rule 8D of the Income Tax rules and added the same to the income of the assessee. The assessee carried the matter before the first appellate authority and before Ld. CIT(A) placed reliance on the following submission. "1. The appellant company had filed the return of income on 27.06.2011 declaring total loss of Rs.51,305/-. The assessment came to be completed u/s 143(3) and determining total income at Rs 3,28,820/-. While completing the assessment disallowance u/s 14A amounting to Rs. 12,91 ,009/- was made which resulted in total income being assessed at Rs.3,28,880/- after giving effect to the carried forward losses depreciation. In the original memo of appeal, the effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unting to Rs.12,91,009/-. 5. At this stage reference is invited to the audited accounts which are enclosed for your kind reference. Attention in particular is drawn to Schedule 10 which is "Other income" amounting to Rs 27,79.391/-. The break-up of other income reveals an interest received income is Rs.27,49,391/-. As against the interest income the financial charges are amounting to Rs.27,46,887/-. This goes to indicate that there is a net surplus of interest of Rs.2,504/- (Rs.27,49,391 - 27,46,887/-). The AO for some inexplicable reason completely ignored the fact that the appellant company is having net interest income. The AO has completely ignored the fact that over all the appellant company has received a net interest income of Rs.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven in the earlier years the Even presuming that these investments have been made out of the interest bearing funds in the earlier years i.e. A. Y. 2005-06 and A.Y. 2006-07. Assessment was completed u/s 143(3) of the Act. Copy of assessment orders are also enclosed for your kind reference. The perusal of the assessment order would indicate that there is no disallowance of interest made by the AO in the earlier years on the basis of which an inference can be drawn that the interest bearing funds of all the earlier years have been utilized for making investment in shares which have alleged to have generated exempt income and thereby raised the issue of disallowance u/s 14A of the Act. 8. The perusal of the audited accounts would also reveal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2007- 08 was completed 143(3) of the Act. Copy of the order is also enclosed for your kind reference. The perusal of the assessment order for A. Y.2007-08 would reveal that the returned income has been accepted. This only goes to establish the fact that the Department has accepted that there is no diversion of interest bearing funds towards the making of investments yielding exempt income. During the year under consideration no fresh/additional investment in shares has been made by which an inference can be drawn that there is diversion of interest bearing funds with investments." 4. Reliance was also placed on various case laws. Ld. CIT(A) after taking into consideration these submissions deleted the disallowance made by the assessing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereby raised the issue of disallowance u/s 14A of the Act. In the light of these undisputed facts of this case ld. CIT(A) had held that this was not a fit case in which provisions of section 14A of the Act were attracted. While holding so Ld. CIT(A) placed reliance on the decision of Hon'ble High Court of Gujrat in the case of CIT vs. M/s Lubi Submersibles Ltd in tax appeal no. 868 of 2010 wherein following was held: "As can be seen from the treatment accorded to the said issue by the Tribunal, the Tribunal decided on the basis of provisions contained in Section 14A of the income-Tax Act, 1961 ("Act" for short) which states that no deduction could be allowed in respect of expenditure incurred in relation to income which does not form par ..... X X X X Extracts X X X X X X X X Extracts X X X X
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