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TMI Blog2014 (4) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case. 2. The learned CIT(A) has erred in allowing relief to the assessee on the issue of disallowance u/s 14A r.w. Rule 8D without considering the facts and circumstances of the case and without appreciating the provisions of Rule 8D where in clause (ii) of sub-Rule (2) it is clearly laid down that interest expenses incurred on the general pool of loans are to be proportionately apportioned to exempt income as prescribed. 3. The Ld. CIT(A) has erred in holding that interest expenses of Rs 1,96,40,264/- are directly attributable to a particular income and therefore do not qualify to be apportioned as prescribed in clause (ii) of sub- Rule (2) of Rule 8D, without appreciating that the interest expenses were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estments would yield tax free dividend income and therefore expenses incurred in earning the tax free dividend income have to be disallowed. Accordingly, the AO issued show cause notice to the assessee, to which the assessee submitted that it had the following share capital and reserves & surplus as per the balance sheet as on 31.3.2009:- Share capital issued 201,25,38,711 Reserves & Surplus 181,16,07,538 Share holders fund & reserves 382,41,46,309 5. The assessee thus submitted that it was in possession of interest free funds to the above extent and no amount of borrowed capital can be attributed for making the aforesaid investments. The assessee also submitted that the funds which were borrowed and interest had been paid were used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.1,96,40,264 Rs. 17,84,634 Rs.2,14,24,898" 7. Aggrieved by the order of the AO, the assessee preferred appeal before the CIT(Appeals). The CIT(A) confirmed the order of the AO with regard to disallowance of overhead and administrative expenses under Rule 8D(2)(iii) of the Act. With regard to Rule 8D(2)(ii) of the Act, the CIT(A) held as follows:- "3.14 The submissions of the appellant have been considered with reference to the details available on record and it is sufficiently proved that borrowals are for the business purpose and they had sufficient surplus funds for making investments. The gross investment as on 31/3/2009 is Rs.37,79,59,912/-. The share capital of the company and the reserves and surplus are as under as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the conclusion that surplus funds had been utilized for making investments. It was further submitted that the CIT(A) had cast the burden of proving nexus between the borrowed funds and exempt investments on the revenue, whereas it is for the assessee to show that borrowed funds on which interest was paid had not been used for making investments which would yield tax free income. It was submitted by him that the matter may be remanded to the AO and the assessee should be asked to correlate the availability of surplus funds on the date on which investments were made. It was also submitted by him that there was nothing on record brought by the assessee to show that borrowed funds were used only for specific purposes for which borrowings were m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,390 40,13,00,000 8,45,00,000 82,28,904 Total (A) 338,12,28,252 236,97,93,467 Unsecured loans Fixed deposits from public 10,26,55,000 9,40,59,719 Compulsory convertible debentures from DAMF II 56,78,34,400 56,78,34,400 Short term loan from a financial institution 50,00,00,000 Nil Other loans and advances From banks From others 3,69,11,131 1,13,43,395 1,89,03,648 1,62,65,58,375 Total (B) 121,87,43,926 69,70,56,133 Total loan Liability (A+B) 459,99,72,178 11. From a perusal of the various loans detailed above, it appears that loans were for specific purpose and were not capable for being used for making investments. We, however, find that none of the authorities have gone i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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