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TMI Blog2014 (7) TMI 753X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses incurred for exempted income u/s 14A – Held that:- The assessee was having sufficient profit and interest free funds in comparison to the investments and with respect to mutual fund transactions, no interest has been charged by the bank except security transaction tax and considering the above when the deductions u/s 14A of the IT Act was restricted to ₹ 64,909/-, it cannot be said that both CIT(A) and Tribunal have committed any error – Relying upon CIT v. Reliance Utilities & Power Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY] - the order of the Tribunal is upheld – Decided against Revenue. - TAX APPEAL NO. 1058 -1060 of 2013 - - - Dated:- 10-12-2013 - M.R. SHAH And R.P.DHOLARIA, JJ. For the Appellant: K.M. Parikh. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal was correct in deleting the addition made on account of disallowance of interest expenditure of ₹ 26,21,684/-without appreciating that the assessee failed to establish that investments in mutual funds and interest free advances had been made out of own interest free funds by furnishing day-to-day cash-flow statement? Tax Appeal No. 1060/2013 1.3 Feeling aggrieved and dissatisfied with the impugned judgment and order dated 01.05.2013 passed by the learned ITAT in ITA No. 3192/Ahd./2010 for the assessment year 2006-07, the Revenue has preferred the present tax appeal to consider the following substantial question of law (1) Whether on the facts and circumstances of the case, the ITAT was right in law in deleting th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowed an amount of ₹ 16,02,493/- being the interest expenditure under Section 36(1)(iii) of the IT Act [which is the dispute/issue in the present tax appeal]. 2.2 That being aggrieved and dissatisfied with the order passed by the AO making disallowance of ₹ 16,02,493/- being the interest expenditure under section 36(1)(iii) of the IT Act, the assessee preferred appeal before the learned CIT(A) and the learned CIT(A) confirmed the disallowance made by the AO under section 36(1)(iii) of the IT Act. 2.3 Feeling aggrieved and dissatisfied with the order passed by the learned CIT(A), the assessee preferred appeal before the learned ITAT and by impugned judgment and order, the learned ITAT has deleted the disallowance under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance Utilities Power Ltd. (supra) and has specifically observed that the interest free funds as on the date of balance-sheet were far in excess of investments as on 31.03.2004. In para 23 [AY 2004-05] and while deleting the disallowance made by the AO under section 36(1)(iii) of the IT Act, the learned ITAT has observed as under: 23. From the audited Balance Sheet as on 31.03.2004 placed on record it is seen that as on 31.03.2004 the investments of the Assessee are to the tune of ₹ 5.82 crore as compared to ₹ 46,000/- in the immediately preceding financial year meaning thereby that the investments to the extent of ₹ 5,82,28,953/- have been made during the year. It is also seen from the Balance Sheet that the int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verdraft and/or loans taken, then a presumption would arise that investments would be out of the interest-free funds generated or available with the company, if the interest-free funds were sufficient to meet the investments and therefore, interest was deductible. Similar view has been taken by the Division Bench of this Court in the case of CIT v. Gujarat State Fertilizers Chemicals Ltd. [2013] 358 ITR 323. Applying the ratio/law laid down by the Bombay High Court in the case of Reliance Utilities Power Ltd. (supra) as well as Division Bench of this Court in the case of Gujarat State Fertilizers Chemicals Ltd. (supra) to the facts of the case on hand and when it has been found that the assessee was having interest-free funds far in e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestments in mutual funds was in the A.Y. 04-05 when the net investment was ₹ 2.27 crores against the receipt of interest free unsecured loans of ₹ 11.1 Crores. During A.Y. 05-06 the investment as on 31-03-05 was ₹ 2.01 crores and there was profit of ₹ 85 lakhs from the business and repayment of interest free unsecured loans of ₹ 4.7 crores. Further in the current year, there was profit of ₹ 11.82 crores and increase in interest free unsecured loan of ₹ 1.2 crores and the investment in mutual fund is at ₹ 2.33 crores as on 31-03-06. Furthermore all the mutual fund transactions were carried out through Citi Bank account and there are redemption and dividend receipts and investments during the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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