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TMI Blog2016 (3) TMI 233X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the assessee that no disallowance of interest can be made u/s 14A r.w. Rule 8D of the Act. Otherwise also Ld. Counsel has specifically pointed out before us, the source of investments, which were from interest free funds. Thus, on these facts also, no disallowance of interest can be made. Coming to the indirect expenses, we find that assessee has debited sum of ₹ 8.92 crores on the ‘employees costs’ which majorly constituted “salary” of the employees. As pointed out by the Ld. Senior Counsel, the only activity in relation to the investment carried out by the assessee was Switching of one HSBC Mutual Fund account to Reliance Mutual Fund account. Thus, if at all any indirect expenses is to be attributable, then same has to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank of India, which is mainly in the business of sale of foreign currencies, foreign money exchange etc. During the year, the assessee had earned a dividend income of ₹ 38,18,832/- which was claimed as exempt in computation of total income. The assessee has not computed any disallowance for earning of the exempt income. In response to the show cause notice, assessee submitted that entire investments were made out of assessee s own interest free funds, therefore, no direct or indirect expenses were incurred. However, the AO computed the disallowance as per formula laid down under Rule 8D. 3. Before the CIT(A), the assessee reiterated the same submissions, stating that it has own sufficient funds in the form of share capital and free ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 83,41,03,289 Redemption for investment in Reliance Money Manager Mutual Fund On 25.03.2008 (69,00,00,000) Redemption others (14,00,00,000) Closing balance as on 31.3.2008 41,03,289 Reliance Money Manager Mutual Fund (Institutional option dividend plan) Particulars No. of Units Rate Balance (Rs) Purchased out of redemption proceeds of HSBC MF 6,89,216.774 1,001.1364 69,00,00,000 Dividend reinvestment 877.279 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment. Thus, it can be safely presumed that no interest bearing funds have been diverted for making the investment in HSBC or Reliance Mutual Fund. Now, the Hon ble jurisdictional High Court in the case of CIT vs HDFC Bank Ltd, [Income Tax Appeal 330 of 2012, judgment and order dated 23rd July, 2014], has laid down the proposition that, if assessee s capital, profit reserve surplus and current account deposits are higher than the investment in tax free securities, then it would be presumed that investments made by the assessee would be out of interest free funds available with the assessee. Thus, we agree with the contention of the assessee that no disallowance on account of interest can be made u/s 14A. Otherwise also Ld. Counsel has spe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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