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TMI Blog2015 (2) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... as proved on a scientific basis that the interest paid on loans taken for investment in the exempt bonds was much larger - Held that:- the assessee has claimed exemption from interest on tax free bonds. It is fact that the assessee has made systematic huge investments resulting in income and no expenditure in the form of expenditure and management have been made by the assessee. As the income is exempted, proportionate expenditure in this regard to be disallowed but as to how much. This issue has to be considered. It is to be noted that reasonable disallowance can be made i.e., to the extent of 2% of the exempted income. Accordingly, the Assessing Officer is directed to disallow proportionate expenditure to the extent of 2% of the exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise duty and scrap sales as forming part of the turn over in computing income under Section 80 HHC. Aggrieved against the said order, the assessee preferred an appeal before the CIT (Appeals) and the CIT (Appeals) upheld the order of the Assessing Officer. 3. Aggrieved over the same, the assessee preferred appeal before the Income Tax Appellate Tribunal and the Tribunal, following the decision of the Madras High Court in CIT - Vs - M/s. Sundaram Fastners Ltd. (272 ITR 652) and CIT - Vs - Wheels India Ltd. (275 ITR 319), Fenner India Ltd. - Vs - CIT (241 ITR 803), allowed the appeal filed by the assessee. Aggrieved by the said order, the Revenue is before this Court by filing the above appeal. 4. Heard the learned standing counsel a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the decision of this Court in Fenner India's case (supra) and, therefore, the first question of law is answered against the Revenue and in favour of the assessee. 7. Insofar as the 2nd question of law is concerned, the Tribunal has considered the same, the relevant portion of which is extracted hereinbelow :- 8. The next issue in this appeal is against the disallowance of proportionate expenses on exempted income. After considering the rival submissions and going through the case records, it is observed that the assessee has claimed exemption from interest on tax free bonds. It is fact that the assessee has made systematic huge investments resulting in income and no expenditure in the form of expenditure and m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pholding the estimate of expenses at 2% deemed to have been incurred in respect of dividend income, when no such expenses were incurred? (ii) Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in upholding the addition of the estimate expenses at the rate of 2% on dividend income while computing book profits, when no such expenses were incurred? and answered the same as under: 2. As far as first and second questions of law are concerned, learned counsel for the assessee fairly submits that the same is covered against the assessee by reason of decision of this Court rendered in assessee's own case in T.C. No.2287 of 2006 dated 8.8.12. Accordingly, the above two questions ..... X X X X Extracts X X X X X X X X Extracts X X X X
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