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TMI Blog2013 (1) TMI 798X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant company has made investment in Mutual Fund on which exempt income is derived. The said investment was wholly made out of retained profits of the company. The appellant company is making consistent profit year after year. The appellant company has not borrowed funds for making investment. There is not any nexus between the interest expenditure incurred on borrowed fund and the amount of fund invested in the Mutual fund. The ld AO has without appreciating the facts of the case made disallowance u/s 14 A of ₹ 11,93,964/-, which is wrong and need to be deleted. 03. In the year under consideration the appellant had earned exempt income of ₹ 15,18,264/- u/s 10(34)/(35). The Ld. AO has disallowed proportionate interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the present year is only about ₹ 20 lacs whereas investment in mutual funds during this year is of ₹ 156 lacs and hence, it cannot be said that borrowed funds were used for purchasing mutual funds. He also submitted that on page 49 of the paper book is profit loss account of the assessee company as per which, net profit after tax in this year is ₹ 383.71 lacs and hence, the same is more than double of the investment during the present year in mutual funds. 5. Regarding disallowance made in respect of other expenses to the extent of 0.5% of the investment, it was submitted that the same is also excessive. He has placed reliance on the Tribunal s decision rendered in the case of Kamal Madmohan Mangaldas Vs ITO in I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his judgment of the Hon ble Bombay High Court, it has to be accepted that the interest expenditure is attributable to the business income and not to exempt dividend income and hence, such interest expenditure is not required to be allocated to exempt income on proportionate basis as per Rule 8D of the IT Rules. Hence, we delete the disallowance of interest expenditure. 8. Regarding balance disallowance of ₹ 42,790/- in respect of other expenditure to the extent of 0.5% of average investment as per Rule 8D, we are of the considered opinion that this disallowance is justified in the facts of the present case, because the assessee has not made any efforts to bring out the expenditure incurred for earning business income with evidence. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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