2013 (1) TMI 809

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..... f 6,62,50,000/- by AO has been deleted - assessee had not used borrowed funds, for the purpose of investment in equity shares - Tribunal has allowed the interest free expenses incurred for earning the dividend and allowed the deduction under Section 80M
MR.JUSTICE AKIL KURESHI AND MS JUSTICE SONIA GOKANI MR SUDHIR M MEHTA, ADVOCATE FOR THE APPELLANT MR SN SOPARKAR, SR. ADV. WITH MR B S SOPARKAR, ADVOCATE FOR THE RESPONDENT ORAL JUDGMENT (PER : HONOURABLE MS JUSTICE SONIA GOKANI) 1. Revenue has challenged the order of the Income Tax Appellate Tribunal ( "the Tribunal" for short) dated 31.1.2012 under Section 260A of the Income Tax Act, 1961 ( "the Act" for short) proposing following substantial question of law for our considerati .....

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..... 0/- on such loan. It invested the sum of ₹ 29,57,94,855/- in shares and received dividend under Section 10(34) of the Act, which is exempted under the law. The Tribunal noted that there has to be nexus between the borrowed fund and investment made and the same can be established only when it is shown that interest free funds were not available with the assessee. 3. It is argued by the learned counsel Mr. S.M. Mehta that making an investment in equity shares bearing tax free returns, prima facie, would amount to diversion of business fund and the Tribunal has disregarded such vital aspect, and therefore, deletion of addition made on account of disallowance under Section 14A was unjustifiable. 4. On duly considering the submissions as .....

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..... ere was sufficient interest free funds available with the assessee and when the Department failed to establish the link between the borrowed fund and the investment made by the assessee in the equity shares, addition made on account of disallowance of ₹ 6,62,50,000/- by Assessing Officer has been rightly deleted by both the CIT(A) and the Tribunal. 5. It would be apt to refer to the decision of this Court rendered in the case of Commissioner of Income Tax vs. Raghuvir Synthetics Ltd. in Tax Appeal No.829 of 2007 where the question was of assessee having given interest free loans to the associates concerns when it was otherwise paying the interest on certain funds it had borrowed. Factually, when it was found that huge funds were avai .....

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