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TMI Blog2010 (9) TMI 1156X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Hence the A.O. should have disallowed 12% on the entire amount of ₹ 1,32,37,857/- invested as all investments are made only from the current account which shows debit balance already on the opening day and during the entire period of investment i.e. F.Y. 2003-04 & 2004- 05, Thus the Ld. CIT(A) erred in deciding the issue in assessee's favour without verifying the facts. 3. The Id. Learned Commissioner of Income Tax(Appeals) has (without calling for full facts and evidence from assessee or the A.O.) erred in accepting the assessee's plea that non-interest bearing funds were only invested in the Mutual Fund, as the share capital of ₹ 20.05 crores and reserves of ₹ 2.67 crores were all invested in Fixed Assets (Rs. 90 crores earlier) and hence are not at all available for investment in Mutual Fund, The facts clearly prove that entire investment was directly from borrowed funds. Thus case law and assessee's submissions by CIT[A) is incorrect. Therefore, the Ld. CIT(A) erred in law and on facts of the case in deleting the addition mode by the A.O on account of disallowance u/s.!4A of the I.T. Act. 4. On the facts and in the circumstances of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noticed the investment is old investment and fresh investment is only 60.82 lacs and there are no fresh borrowings. The appellant had substantial interest free funds at its disposal and therefore in absence of nexus between the borrowings and the investment, no part-disallowance of interest is warranted. The appellant has share capital of ₹ 2005 lacs whereas the Reserves and Surplus are to the tune of ₹ 267 lacs as against investments of ₹ 60.32 lacs made during the year in dispute. It is notable that in the past no disallowance of Interest has been made so far the old investments are concerned. When an transaction is old transaction and no disallowance of interest has been made in the past, it is net open to the revenue to make disallowance of interest on old outstanding as the year In which the investment have been made, there is no disallowance of interest and if the same investment continues, no disallowance & interest can be made at a later stage. In view of the above discussion and more particularly looking to the fact, the appellant company had far more funds of its own than the investments and that the Assessing Officer has not established any nexus to pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted in 192 ITR 165. 5.1. The ld. counsel of the assessee also pointed out that there were no fresh borrowings. Borrowings in the year under consideration have gone down by a sum of ₹ 791.43 lacs, therefore, there cannot be a presumption that borrowed money have gone into making the investments for the year under consideration and, therefore, no disallowance is called for. The ld. counsel of the assessee contended that the profits after tax for the year under consideration at ₹ 893.27 lacs is far more than the total investments made for the year under consideration at ₹ 60.82 lacs and therefore also the presumption has to be that the investments have come out of cash accruals for the year. In fact when one indivisible bank account is maintained and all the sales proceeds are credited in the said account, even if the said account is CC/OD accounts, funds utilized from such account cannot be said to be from borrowed money if cash accruals are more than the said investments. The ld. counsel of the assessee relied on the decision of the Hon'ble Calcutta High Court in the case of Woolcombers of India Ltd. -vs.- CIT reported in 134 ITR 219 (Cal). The ld. counsel su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions [2] and (3) of section 14A and Rule 8D, Both direct and indirect expenditure incurred would come within the purview of S.14A provided relationship with exempted income must be proximate. In the facts of the present case, admittedly ld. Assessing Officer has not established much less whispered about such proximity and therefore, the question of making any disallowance cannot arise. 5.3. The ld. counsel of the assessee further submitted that if sufficient material is on record to establish that investment in shares/units was made out of non interest bearing fund, no disallowance can be made on an estimated basis out of interest debited to profit & loss account even if there is dividend income from such investments as held by the Hon'ble Punjab & Haryana High Court in the case of Hero Cycles (323 ITR 158). He, therefore, contended that the issue is directly and squarely covered by the recent decision of Hon'ble ITAT, Third Member Bench, Delhi in the case of Wimco Seedlings Ltd. -vs.- DCIT reported in (2007) 107 ITD 267 (Del.) (T.M.), wherein it was held that no disallowance u/s 14A of the Act can be made on presumptive and estimated basis. 6. After hearing both the si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended that interest under sections 234B and 234C is leviable on income computed under section 115JA/ 115JB. The ld. D.R. further submitted that in this decision, the judgment of the Hon'ble Bombay High Court in the case of Snowcem India Ltd. -vs.- DCIT reported in [2009] 313 ITR 170 (Bom.) (supra) relied by the ld. counsel of the assessee has been duly considered. The Hon'ble Third Member in this decision has held that judgment of nonjurisdictional High Court which is rendered without noticing a previous binding precedent or a relevant statutory rule is considered to have been rendered 'per incuriam'. He accordingly contended that the view taken by the Learned Commissioner of Income Tax(Appeals) is inconformity with the view taken by the ITAT, 'C' Bench, Ahmedabad (Third Member) in the case of Kanel Oil & Export Inds. Ltd. -vs.- JCIT (Asst.), Sr.-2, Ahmedabad reported in [2009] 121 ITD 596 (AHD.) (T.M.) (supra), therefore, it may be upheld. 10. After hearing both the sides, we have carefully gone through the orders of authorities below. It is pertinent to note that the judgment of the Hon'ble Bombay High Court in the case of Snowcem India Ltd. -vs.- DCIT reported i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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