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TMI Blog2015 (11) TMI 1369X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion of the ld.counsel for the assessee that had it sufficient interest-free funds and the advance was given out of interest-free funds requires verification at the end of the AO and, accordingly, we hereby set aside the order of the authorities below and restore this issue to the file of AO to verify whether the advance was out of interest-free funds available with the assessee or not. In case, the AO finds that the assessee was having sufficient interest-free funds, he should also delete the disallowance made in respect of advances given to Shree Nidhi Textiles. - Decided in favour of assessee for statistical purposes. - I.T.A. No. 2358/Ahd/2011, I.T.A. No.1322/Ahd/2013 - - - Dated:- 6-11-2015 - Shri Pramod Kumar, Accountant Member And Shri Kul Bharat, Judicial Member For the Petitioner : Shri Sanjay R.Shah, AR For the Respondent : Shri James Kurien, Sr. DR ORDER Per Shri Kul Bharat, Judicial Member Both the appeals by the Assessee are directed against the separate orders of the Ld.Commissioner of Income Tax(Appeals)-XIV, Ahmedabad [ CIT(A) in short] dated 14/07/2011 25/03/2013 pertaining to Assessment Years (AYs) 2008-09 2009-10 respectively. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereinafter referred to as the Act ) was framed vide order dated 26/11/2010, thereby the Assessing Officer (AO in short) made disallowance by invoking the provisions of section 14A of the Act of ₹ 1,91,188/-, disallowance of interest expenses of ₹ 10,37,260/- and disallowance u/s.41(1) of the Act of ₹ 3,71,897/-. The AO also made addition on account of GP rate of ₹ 24,92,246/-. The assessee being aggrieved by the assessment order, preferred an appeal before the ld.CIT(A), who after considering the submissions of the assessee partly allowed the appeal; thereby the ld.CIT(A) deleted the addition of ₹ 24,92,246/-, confirmed the disallowance of ₹ 87,304/- which was made by invoking the provision of section 14A of the Act, restricted the disallowance to the extent of ₹ 7,50,000/- made in respect of interest expenditure and finally the ld.CIT(A) also deleted the addition of ₹ 3,71,897/- made by invoking the provisions of section 41(1) of the Act. Aggrieved by the order of the ld.CIT(A), now the assessee is in further appeal before us. 3. Ground No.2 is against confirming the disallowance of ₹ 87,304/- by invoking the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which do not form part of the total income. One of the contentions of the assessee is that the assessee had received dividend income of ₹ 360/- from Kalupur Commercial Co-op.Bank Ltd. and the same has been offered for tax. Further, it contended that the assessee was having sufficient interest-free fund to meet the investment wherefrom tax exempt income is earned. We find that the ld.CIT(A) has upheld the disallowance on the basis that the provisions of Rule 8D are applicable from AY 2008-09. In our considered view, this is not the correct approach, the disallowance u/s.14A of the Act can be made only, if the expenditure is related to investment wherefrom the exempt income is earned. In the present case, the ld.CIT(A) has not considered the submissions of the assessee that investments have been out of interestfree fund, for commercial expediency and the dividend income has been offered for tax. Therefore, we are unable to confirm the finding of ld.CIT(A). In the light of above discussion, we hereby direct the AO to delete the additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingly, we hereby set aside the order of the authorities below and restore this issue to the file of AO to verify whether the advance was out of interest-free funds available with the assessee or not. In case, the AO finds that the assessee was having sufficient interest-free funds, he should also delete the disallowance made. In respect of advances given to Shree Nidhi Textiles. Thus, this ground of assessee s appeal is allowed for statistical purposes. 6.1. As a result, the appeal of the Assessee in ITA No.2358/Ahd/2011 for AY 2008-09 is partly allowed for statistical purposes. 7. Now, we take up the assessee s appeal in ITA No.1322/Ahd/2013 for AY 2009-10, wherein following grounds have been raised:- Your appellant being aggrieved by the order passed dated 25/03/2013 u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) by the learned Commissioner of Income-tax (Appeals)-XTV, Ahmedabad (hereinafter referred to as the CIT(A) ) presents this appeal against the same on the following grounds which are without prejudice to each other: 1. The order passed by the learned CIT(A) is erroneous and contrary to the provisions of law and facts and the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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