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TMI Blog2016 (3) TMI 186X X X X Extracts X X X X X X X X Extracts X X X X ..... her sale of products of the company then certainly this transaction would have occurred in a normal course of business. We do not find any reason in disbelieving the assessee. We, therefore, delete the addition - Decided in favour of assessee Proportionate disallowance of interest relating to investments meant for earning exempt income - Held that:- Assessee is having a capital reserve and surplus basis of ₹ 9.25 crores and the brought forward investment as on 31.3.2002 is ₹ 3.66 crores and it can be easily inferred from the figures that assessee was having sufficient source of capital and reserve and surplus which might have been utilized for the investments. In lack of any other evidence brought on record by the Revenue as well as respectfully following the decision of Jurisdictional High Court and decision of co-ordinate bench for various years in assessee’s own case, we are of the that no disallowance should have been made for interest in the case of assessee and we delete the same - Decided in favour of assessee - ITA No. 821/Ahd/2010, ITA No. 551/Ahd/2013 - - - Dated:- 29-2-2016 - Shri Kul Bharat, JM And Manish Borad, AM For the Appellant : Shri M. K. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating to investments meant for earning exempt income of ₹ 3,58,015/- 5. Aggrieved, assessee went in appeal before CIT(A) wherein the first appellate authority gave part relief for the addition on account of unaccounted sales by restricting the addition to ₹ 3,50,000/- in place of ₹ 3,26,747/- made by Assessing Officer and confirmed the disallowance on account of interest of ₹ 3,58,015/- made on account of proportionate interest attributable to investment in shares. In regard to the additions referred above at ₹ 3,62,747/- for unaccounted sales and ₹ 3,58,015/- on account of proportionate disallowance of interest -assessee is now in appeal before the Tribunal. 6. First we take up addition on account of unexplained sales. The ld. AR submitted that during the year assessee has sold the stock worth ₹ 8,05,578/- (being brought forward from last year) at ₹ 4,42,831/- and details of item-wise sale is as under :- a) Sale of castings ₹ 4,650/- b) Sale of scraps ₹ 41,700/- c) Sale of consumables stores Rs.3,96,481/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We are further of the view that looking to the total financial exposures of the company in lieu of gross turnover, profit for the year, share capital reserve and surplus etc. and above all when all the books of accounts are audited then raising doubt on a transaction which has been carried out in the normal course of business then it was not correct on the part of the Assessing Officer to doubt about the transaction of a meagre amount without bringing on record any evidence in respect of transactions of suppressed sales. Assessing Officer should have appreciated that business is carried on by its management which has to look after its day to day activities and certainly whimsical doubt should not be raised about a transaction that goods costing of ₹ 8,05,578/- would be sold at a suppressed value of ₹ 4,42, 831/-. When the goods are three years old and are of no regular use by the company and also the fact that there is no other sale of products of the company then certainly this transaction would have occurred in a normal course of business. We do not find any reason in disbelieving the assessee. We, therefore, delete the addition of ₹ 3,50,000/- and allow this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the special knowledge of the assessee, the assessing authority took a most reasonable approach in assessment by way of disallowing proportionate amount of interest. 13. We have heard the rival contentions and perused the material on record. The issue in this ground is for proportionate disallowance of interest attributable to the investment in shares which gives exempt income to the assessee. From perusal of records, we find that during the year under appeal no major investment has been made and most of the investments appearing in the balance sheet seems to have been acquired in past many years which is evident from various orders of co-ordinate bench in assessee s own case for Asst, Year 1984-85, 1990-91, 1991-92 and also as submitted by assessee that the same issue has been dealt for Asst. Years 1985-86, 1987-88 and 1992-93 and in all these years co-ordinate bench has deleted the addition of proportionate disallowance. The year under appeal is Asst. Year 2002-03. Section 14A was inserted by Finance Act 2001 with retrospective effect from 1.4.1962 which relates to disallowance of interest and other expenditure which have been incurred for earning exempt income. From going th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crores and the investment made by it was to the ex tent of ₹ 195.10 crores. In other words, the assessee had sufficient funds for making the investments and it had not used the borrowed funds for such purpose. This aspect of huge surplus funds is not disputed by the revenue which earned it the interest on bonds and dividend income. With regard to disallowance of 1% of administrative expenses averred to have incurred on account of ihe earning of interest, there is nothing on record to indicate that there has been in fact any actual expenditure incurred by the assessee for earning tax free income of Rs.i4 crores. It is also to be noted that out of the total amount of exempt income of ₹ 14 crores, the assessee could point out that 6.12 crores (rounded oil) was earned by 'S' project which was under construction for which no expenditure had been claimed and for the remaining income of ₹ 7.88 crores which consists of dividend and tax free interest, no part of expenditure appears to have been made towards the investment activity as emerging from the material. According to the respondent, the total investment from the huge surplus is comparatively small an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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