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TMI Blog2015 (2) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... t interest bearing funds were used, lies squarely on the shoulders of the revenue. Assessing Officer, however, cannot, by recording general observations, particularly where the assessee has denied using interest bearing funds, proceed to infer that interest bearing income must has been used to earn exempted income. Section 14A of the Act, being in the nature of an exception, has to be construed strictly and only where the Assessing Officer records satisfaction, on the basis of clear and cogent material, shall an order be passed under Section 14A of the Act, disallowing such a claim. As there is no tangible material on record that could have enabled the Assessing Officer to record satisfaction in terms of Section 14A of the Act, findings rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion by holding that the revenue has not been able to prove that interest bearing funds were used. The revenue filed an appeal before the ITAT, Chandigarh Bench 'B', Chandigarh, which was dismissed on 17.04.2013, by affirming the order passed by the CIT(A)-I, Ludhiana. Counsel for the revenue submits that the ITAT has erred in confirming the deletion made by the CIT(A). The onus to prove that interest bearing funds were not used while making investments that earned dividend in the shape of exempted income lay upon the assessee. The Assessing Officer rightly drew an inference against the assessee as he failed to discharge the onus. The CIT(A) has by wrongly placing the onus upon the revenue and by holding that the revenue has failed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der passed by the CIT(A). It is further submitted that the questions of law framed by the revenue have already been answered against the revenue in CIT v. Hero Cycles Ltd. [2006] 323 ITR 518 (P&H), CIT v. Winsome Textile Inustries Ltd. [2009] 319 ITR 204 (P&H) and Commissioner of Income Tax v. Deepak Mittal [2014) 361 ITR 131 (P&H). We have heard counsel for the parties and perused the impugned order. The Assessing Officer disallowed dividend earned by the assessee by holding that interest bearing funds had been used to earn this income. The CIT(A) set aside this finding by holding that the Assessing Officer has failed to prove that interest bearing funds were used by the assessee. The ITAT has affirmed this finding by holding that as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. A relevant extract from the judgment in CIT v. Winsome Textile Inustries Ltd. (supra) reads as follows:- "Abhishek Industries Ltd. [2006] 286 ITR 1 (P&H) relates to the provisions of Section 36(1) (iii) and Section 14A which has been invoked in this case which stands on a different footing. Even if deduction under Section 36(1)(iii) is ordinarily available in respect of borrowed funds utilised for the purpose of business. Section 14A carves out an exception in so far as any expenditure which is relatable to the earning of dividend income not subject to tax is to be disallowed. It would be relevant to point out that the Hon'ble Supreme Court in the case of Rajasthan State Warehousing Corporation v. CIT [2000] 242 ITR 450 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... graph 5 of the letter that investment in the shares of Winsome Yarn Limited was made out of the assessee's own fund and not out of any borrowed funds. Before the Commissioner of Income Tax (Appeals) also, vide letter dated March 15, 2007 the assessee had reiterated that investment in the purchase of the shares of Winsome Yarn Limited in the year 1993-94 had no nexus with the borrowed funds. The Assessing Officer as per the assessment order has not refuted the claim of the assessee but has made a disallowance on the ground that had the said invested in shares were available with the assessee, the assessee would not have been required to raise loans to that extent and incur expenditure on interest on such loans. In our considered view, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed strictly and only where the Assessing Officer records satisfaction, on the basis of clear and cogent material, shall an order be passed under Section 14A of the Act, disallowing such a claim. As there is no tangible material on record that could have enabled the Assessing Officer to record satisfaction in terms of Section 14A of the Act, findings recorded by the CIT(A) and the ITAT that the Assessing Officer has failed to discharge this onus are neither perverse nor arbitrary and, therefore, do not call for interference. Even otherwise, the controversy, in our considered opinion, is squarely covered in favour of the assessee by the judgment in CIT v. Winsome Textile Industries Ltd. (supra). We, therefore, find no reason to interfere wit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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