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TMI Blog2014 (9) TMI 207X X X X Extracts X X X X X X X X Extracts X X X X ..... d for specific purpose and balance interest paid by the assessee - after examining the balance-sheet of the assessee, a finding of fact has been recorded that the funds utilized by the assessee being mixed funds, therefore, the interest paid by the assessee is also an interest on the investments made – no substantial question of law arises for consideration – Decided against assessee. - I.T.A. No. 277 of 2013 - - - Dated:- 20-8-2014 - Hemant Gupta And Fateh Deep Singh,JJ. Mr. Aalok Mittal, Advocate, for the appellant. Ms. Savita Saxena, Advocate, for the respondents. ORDER Hemant Gupta, J. The present appeal under Section 260 A of the Income Tax Act, 1961 (for short the Act ) is directed against an order passe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curred and on the other hand, certain amounts had been invested in earning tax free dividend income. The Assessing Officer returned a finding that in view of the massive turnover of the assessee and its complicated flow of funds, it is difficult to identify as to which funds have been used for what purpose. It is admitted by the assessee that there is unity of control, commonality of funds and management in relation to business activity and investment activity income from which does not or shall not form part of the total income . Consequently, the Assessing Officer disallowed ₹ 47,68,522/- from the exempted income. In further appeal, the Commissioner of Income Tax (Appeals) vide its order dated 28.09.2011 (Annexure A-2) returne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to ₹ 10,49,851/-. Consequently, we direct the Assessing Officer to disallow ₹ 10,49,851/- being the interest so relatable to the earning of exempt income. We find no merit in the alternate plea raised by the assessee that no disallowance of interest is called for after setting off the interest paid and interest received, where there is no interest payment. Admittedly the assessee had paid total interest of ₹ 2.92 crores out of which interest paid on term loan raised for specific purpose totals to ₹ 1.70 crores and balance interest paid by the assessee is ₹ 1.21 crores. The funds utilized by the assessee being mixed funds and in view of the provisions of Rule 8D(2)(ii) of the Income Tax Rules the disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had interest free funds of its own which had been generated in the year in question, which has been invested for earning exempt income. Similarly, in Hero cycles Ltd. case (supra), again the Revenue was in appeal. The Court has noticed that the Tribunal has held that the expenditure on interest was set off against the income from interest and the investment in the share and funds were out of the dividend proceeds. In view of the finding of fact, disallowance under Section 14A of the Act was not found to be sustainable. The Court observed that as to whether any expenditure incurred was to be disallowed is a question of fact. It was held to the following effect: In view of the finding reproduced above, it is clear that the expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X
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