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TMI Blog2014 (11) TMI 771X X X X Extracts X X X X X X X X Extracts X X X X ..... by mechanically and perfunctorily invoking formula prescribed under Rule 80 without appreciating the suo motu disallowances of Rs. 1,80,600 made by the Appellant. 1.2 The CIT(A) failed to appreciate that the appellant has made investment in subsidiary companies and as such no disallowance uls 14A is called for. 1.3 The learned CIT(A) failed to appreciate that the Appellant's own capital exceed the investment in shares and mutual funds by almost than 3 times thus justifying that falling within the parameters of the decision of the Bombay High Court in Reliance Utilities Ltd. 313 ITR 340 (Bom). 1.4 The learned CIT(A) erred in not accepting the claim of the Appellant that for invoking Rule 80, the satisfaction of AO about the correctne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s called for. The assessee has also submitted that the reserve and surplus fund has increased from Rs. 570.61 crores to 579.57 crore during the year ended 31.03.2008. Accordingly, there is a net increase of 8.95 crore. Whereas there is net decrease in the investment of the company by 56.06 crores crores as compared to the previous year. It was also submitted that even if interest received by the company on a net basis, the interest income exceeds interest expenditure. Thus the assessee claimed that no expenditure was incurred for earning the tax free dividend income and accordingly no disallowance is called for. Alternatively, the assessee submitted that in case the disallowance is made, the same should be on reasonable basis and restricted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s with group company namely Indus-Ind Bank. The Ld. Authorized Representative has submitted that even otherwise, borrowed fund utilized only for three days during the year as it is clear from the statement of fund flow and, therefore, the disallowance on account of interest expenditure cannot be made more than the proportionate period of use of borrowed fund. Further during the year under consideration, the assessee has sold the mutual funds and to that extent the fund was available with the assessee for making investment during the year. He has relied upon the following decisions:- (i) Garware Wall Ropes Ltd. (Mum-ITA No. 5408/Mum/2012 and 4957/Mum/2012 (ii) JM Financial Ltd. (Mum)-ITA no. 4521/Mum/2012 (iii) EIH Associated Hotels Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufficient for making the investment in question. Once the assessee has claimed that his own fund is available for investment then it is incumbent upon the Assessing Officer to examine and verify the claim of the assessee and then give the finding on the availability as well as use of interest free fund. Further a very relevant aspect has not been examined regarding investment in the subsidiary and group concern. So far as the investment in the subsidiary is concerned, it is not with the motive and purpose of earning dividend income but for holding controlling stake in the subsidiary. Further if the investments in subsidiary is for control and for a long period then for the purpose of disallowance as per formula provided under Rule 8D, the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowed u/s 14A. Though, the assessee has contended that it has not incurred any expenditure for earning the dividend income, however, it is manifest from the record that the assessee has disposed off some investments and also made new investment during the year, therefore, high level administrative machinery of the assessee is involved for taken the decision of sale of investment and making new investment. Once the administration of the assessee is involved in decision making process in respect of the investment, the provisions of section 14A are attracted. However as we have already observed that for the purpose of working out the quantum of disallowance as per Rule 8D, the investment made in subsidiaries for the purpose of holding the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Ld. Authorized Representative of the assessee has submitted that the expenses were incurred in respect of the land which is held as stock-in-trade. Therefore, the said expenditure cannot be treated as capital in nature. He has referred the details of the expenses and submitted that none of the expenditure is enduring in nature and, therefore, the same are allowable as revenue expenditure. 14. On the other hand, the Ld. DR has relied upon the orders of authorities below and submitted that the assessee has not shown the stock in trade in Profit & Loss Account and it was shown directly into the balance sheet. Therefore, the expenditure incurred relating to the land not included as stock in trade in P&L account cannot be allowed. 15. Ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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