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TMI Blog2013 (11) TMI 1331X X X X Extracts X X X X X X X X Extracts X X X X ..... t.Ltd. 187 ITR 363 (All) decided on identical facts, holding that the differential amount of interest paid @ 8% on the funds borrowed for carrying on business but advanced to directors @ 5% was not allowable as deduction. 1(c) The CIT(A) failed to appreciate the legal principle that, the affairs of the assessee being in his special knowledge in terms of section 106 of the Evidence Act, the onus u/s.36(1)(iii) lies on the assessee to prove that each loan is used for the purposes of the business and there is no presumption in law that it is own capital or surplus funds that were diverted for non-business purposes, as settled in the cases of Kishanchand Chellaram vs CIT 114 ITR 654 (Bom), R.Dalmia vs CIT 133 ITR 169 (Del), CIT vs M.S. Venkateshwaran 222 ITR 163 (Mad), K.Somasundaram & Brothers vs CIT 238 ITR 939 (Mad), CIT vs Motor General Finance Ltd. 254 ITR 449 (Del) [confirmed by the Supreme Court: 267 ITR 381] and CIT vs Abhishek Industries Ltd. 286 ITR 01 (P&H). 2. Facts in brief as emerged from the corresponding assessment orders both passed u/s.143(3); respectively dated 27.12.2007 and 05/12/2008, wherein it was mentioned that the assessee-company is in the busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee by following few orders of the Tribunal also decided in assessee's own case in its favour in the past. In the past ITAT "D" Bench has taken a view for AYs 1999- 2000, 2000-01, 2001-02, 2002-03 & 2003-04 in ITA Nos.3272/Ahd/2002, 1623/Ahd/2003, 1353 & 2180/Ahd/2005 and ITA No.08/Ahd/2007 respectively vide order dated 30/09/2010 in assessee's favour again by following the order of the Tribunal pronounced in assessee's own case for AY 1998-99 in ITA No.1233/Ahd/2002, wherein it was held that the assessee had its own substantial interest-free funds out of which advances have been made. An another noting has been made that the Revenue had not made out a case that interest bearing borrowed funds have been diverted to the group concerns by charging lower rate of interest. For the years under consideration, in the absence of any contrary material placed on record from the side of the Revenue, we are left with no option but to follow the past precedent as held in assessee's favour vide series of orders cited supra. Therefore, the result is that the ground as raised by the Revenue stood covered in assessee's favour, hence dismissed. 5. Ground No.2 for AYs 2005-06 & 2006-07 is agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or applying the provisions of section 40A(2)(a) and that interest earned on unsecured borrowings is always higher than the rate of interest paid to the bank account from where loan raised; hence accepted that interest paid to Sun Pharmaceuticals @ 24% p.a. to be reasonable. We therefore hold that since the Tribunal/High Court is taking a consistent view in favour of the assessee in the past, therefore respectfully following these decisions for the year under consideration, we hereby hold that the Revenue has no force in the grounds raised for both the years, hence dismiss the same. 7. The third ground of A.Y. 2005-06 reads as under: 3. On the facts and in the circumstances of the case and in law, the ld.CIT(A) erred in deleting the disallowance u/s.14A of the expenses of Rs.13,56,629/- incurred for earning dividend income exempt u/s.10(33). 7.1. The third ground of A.Y. 2006-07 reads as under: 3(a) On the facts and in the circumstances of the case and in law, the ld.CIT(A) erred in deleting the disallowance u/s.14A(2) r.w.s. rule 8D Rs.21,33,019/- incurred for earning dividend income exempt u/s.10(34) r.w.s.115-O. 3(b) On the facts and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rate of 10% on a loan of Rs.4 crores for the period of 3 months and 2 days which amounted to Rs.10,08,2197- by invoking provisions of section!4A as the funds were utilized in investments for earning exempt income of Rs.1,92,58,879/-. He further made a disallowance for an estimated sum of Rs.50,000/- towards other expenses in earning exempt income. Similarly, he also disallowed 10% of dividend income of Rs.1,01,50,123/- towards interest and miscellaneous expense for earning exempt income for investment made in earlier years and disallowed Rs.10,15,012/- under section 14A of the Act. In appeal, the Learned Commissioner of Income Tax (Appeals) deleted the disallowance on the ground that the disallowance was made by the Learned Assessing Officer without any correlation or nexus having been established between such expenditure and dividend income. According to the Learned Commissioner of Income Tax (Appeals) it was a notional disallowance which cannot be upheld. The Learned Departmental Representative has submitted that the issue should be restored to the file of the Learned Assessing Officer for fresh adjudication in the light of the decision of Hon'ble Bombay High Court in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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