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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 ..... t without appreciating the facts that the assessee failed to established the interest free funds have been utilized for the purpose of investment in exempted source." 3. Brief facts of the case are that during the assessment proceedings assessing officer found that assessee has shown exempted income of Rs. 30,000/- on account of dividend. It was further noticed that the assessee has claimed expenses which included administrative and interest. Assessing officer show caused as to why the provisions of 14A of the Act should not be applied and proportionate expenses should not be disallowed as per rule 8D of the IT Rule, 1961. Assessee submitted explanation mentioning interalia that assessee was having more interest free funds then the investm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end. It has also been stated that the appellant company has claimed expenses which include the administrative and interest expenses. As a consequence of this the appellant was issued a show cause notice as to why the provisions u/s 14A of the Act not be invoked & disallowance be made as per the provisions of Rule 8D of the IT. 3. The contentions of the appellant company have been taken cognizance off, albeit in a summarized form. It was pointed out to the AO that the appellant company has in fact shown interest income and not expenses. It was also pointed out that the appellant company is having interest free funds of Rs.1,01,09,601/- and the investment in shares was out of the interest free funds available with the appellant company. 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an by no stretch of imagination be stated to have a direct relationship or nexus with the generation of income which is not chargeable to tax. Whether the company pursues any commercial activity or not these expenses have to be borne by the appellant company and are essential for the for the existence, regular conduct & continuance thereof. 7. At this juncture it may be pointed out that the interest free funds available with the appellant company are identified as under: a. Share capital Rs, 12,50,000/- b. Reserves and surplus Rs. 16.66.220/- c.current liabilities & provisions Rs. 78,16,293/- d. Deferred tax assets Rs. 3,26,896/- Total Rs.1,10,59,410/- The investment in shares has been made of Rs.1,06,00,670/-. Therefore, the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ease in creditors is to the extent of Rs 64,75,749/-. Therefore, the analysis of the balance sheet would clearly indicate that during the year under consideration the appellant company has recovered the loans and advances given on interest basis. The loans recovered to the extent of Rs. 1,45,64,676 well as disinvestment in share application money of Rs,25,00,000/- & increase in dry creditors of Rs 64,75,749/- totaling Rs.2,35,40,425 have been utilized to pay off unsecured loans to the extent of Rs.2,43,71,292/-. 9. At this stage it is essential to point out that the investment in shares is as under: Investment in shares A.Y.08-09 A. Y. 07-08 A.Y.06-07 10600677 13150677 10250677 The copies of the audited accounts are also en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wever after perusal of the details filed by assessee before him found that during the relevant period assessee was having substantial interest free funds at his disposal to make investments in shares. The assessee was having total interest free income of 1,10,59,410/- whereas the investment in shares was of Rs. 1,06,00,670/-. Thus the interest free funds available with the assessee were in excess of the investment made in shares from which dividend income which is exempt in nature were received. Ld. CIT(A) further found after perusal of the assessment orders of earlier years that there was no disallowance of interest by the assessing officer in the earlier years on the basis of which an inference could be drawn that the interest bearing fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me. By discussing at length the similar view taken by the cognate Bench in the case of A.C.U.I.T vs. Jupiter Corporate Services Limited, it concluded that in absence of any material, it was evident that no expenditure had been incurred by way of interest which could be related to dividend income, nor was brought any material to suggest that the borrowed funds were utilized for investment in shares. While there was no disallowance of interest paid on borrowed funds was made in the preceding Assessment Year, there was no material available before the Tribunal to take a different view than already taken in the earlier Assessment Year. Logic given for conclusion requires no interference. It was on the basis of evidence which was presented befor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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