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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 ..... on - Decided in favor of Revenue. - ITA No.1353/Bang/2012 - - - Dated:- 30-9-2013 - N Barathvaja Sankar And N V Vasudevan, JJ. For the Appellant : Shri A Sundararajan, Jt. CIT(DR) For the Respondent : Shri C Ramesh, CA ORDER:- PER : N V Vasudevan This appeal by the revenue is against the order dated 17.07.2012 of the CIT(Appeals)-I, Bangalore relating to assessment year 2009-10. 2. The revised grounds of appeal raised by the revenue reads as follows:- "1. The order of the learned CIT(A) in so far as it is prejudicial to the Revenue, is opposed to law and facts and circumstances 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Works Ltd. 1,12,81,274 1,12,81,274 A.N. Coffeeday International Ltd. 1,59,237 1,59,237 Coffee Day Properties India (P) Ltd. 1,00,000 - Devadarshini Info Technologies (P) Ltd. (Refer note below) 17,50,00,000 17,50,00,000 Share application money paid to A.N. Coffeeday International Ltd. 14,32,75,766 10,13,07,581 Total 37,79,59,912 33,5893,727 4. The AO was of the view that the assessee had utilized borrowed funds on which interest was paid and claimed as expenditure in the profit loss account while computing income from business for making the investments. In view of the provisions of section 14A of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 14A of the Act as follows:- " In view of the foregoing it is clear that provisions of sec. 14A are applicable to the assessee s case and accordingly the disallowance u/s. 14A is worked out as under as stipulated in Rule 8D of the I.T. Rules 1962. Disallowance u/s. 14A (i) Nil (ii) Total Int. paid as per P L a/c Rs.42,32,06,346/- (A) As appearing on the first day of the previous year in the B/S (A.Y. 2008-09) As appearing on the first day of the previous year in the B/S (A.Y. 2009-10) Average (Rs.) Investment 33,58,93,727 37,79,59,912 35,69,26,819 (B) Assets 695,79,25,053 842,41,18,487 769,10,21,770 (C) AX B = ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments. In view of this, the AO s observation that the appellant failed to prove that interest-free funds were utilized for such investments is not justifiable. Hence the disallowance of Rs.1,96,40,264/- under Rule 8D(2)(ii) of the I.T. Rules is not sustainable and accordingly deleted. 3.15 . 3.16 In view of the detailed discussion above, the disallowance u/s. 14A of the Act is restricted to the extent of Rs.17,84,634/- under Rule 8D(2)(ii) of the I.T. Rules as against Rs.2,14,24,898/- quantified by the AO in the order subject to the adjustments ordered in the following paragraphs." 8. Aggrieved by the order of the CIT(Appeals), the revenue has preferred the present appeal before the Tribunal. 9. We have heard the submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31.3.2008 31.3.2009 Secured loans Short term capital from banks Bank Overdrafts Karnataka Bank Ltd. 5,02,04,374 4,75,56,156 Axis Bank Ltd. 2,02,27,744 1,02,40,929 Bills purchased Karnataka Bank Ltd. 1,32,43,790 19,28,75,732 Oriental Bank of Commerce 7,34,03,648 8,70,52,825 Packing credit loan account Karnataka Bank Ltd. 16,14,83,694 16,00,01,702 Oriental Bank of Commerce 29,28,80,000 28,29,00,000 Term loans from banks Canara Bank Indian O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered afresh by the AO. 12. The assessee has to:- (i) establish that the investments made by it which are likely to yield tax free income were made out of own funds; or in the alternative; (ii) establish that as on that date when the investments were so made, there were surplus funds available; or thirdly, (iii) establish that the borrowed funds on which interest was paid were used only for the purpose for which the funds were borrowed and for no other purposes. 13. With these observations, the order of the CIT(Appeals) is set aside and the matter is remanded to the Assessing Officer for fresh consideration. The AO will afford reasonable opportunity of being heard to the assessee for deciding this issue. 14. For statist ..... X X X X Extracts X X X X X X X X Extracts X X X X
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