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TMI Blog2011 (10) TMI 662X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer during the course of assessment proceedings had invoked the provisions of section 14A of the Income Tax Act read with Rule 8D of the Income Tax Rules and computed the disallowance out of dividend income received by the assessee. During the year under consideration the assessee had received dividend income from mutual fund at ₹ 3.84 crores and dividend income from shares in Indian companies at ₹ 40.77 crores. The said dividend income was claimed exempt u/s 10(34)/10(35) of the Income Tax Act respectively. The Assessing Officer computed the disallowance on ₹ 4.16 crores on account of both interest expenditure and indirect expenditure (interest expenditure ₹ 3.08 crores and indirect expenditure ₹ 1.08 crores). The assessee challenged the aforesaid disallowance u/s 14A of the Income Tax Act before the CIT (Appeals). 5. The CIT (Appeals) deliberated upon the disallowance out of interest expenditure at length taking into consideration the submissions of the assessee in respect of the investments in mutual funds/shares/investment in companies. The CIT (Appeals) noted that there was increase in the investment during the year under conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Net Funds Generated from Investments 753014513 Plus Funds from Investments -284580653 As submitted before Ld. A.O. increase in total investments is only due to reinvestment of surplus income from these investments itself as well as internal accrual which are more than amount of increase in investments. The net cash profits of the cm for the year under consideration as per audited balance sheet are at ₹ 123.89 Crores, which includes income from investments at ₹ 75.30 Crores as per chart given above. 7.The CIT (Appeals) vide para 14 noted that the assessee during the course of assessment proceedings had filed complete details of its bank account relating to the transaction of investment made, to prove that the surplus funds were available with the company on the date of transaction. The CIT (Appeals) further observed that The AO has not controverted the facts in the assessment order or in the proceedings before me. The Ld.AR reiterated his stand with reference to these statements placed in paper book that fresh investments in the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... borrowings. The CIT (Appeals) also considered that the assessee had suo motu disallowed a sum of ₹ 1.52 crores being the expenditure incurred directly attributable to the exempt income. The CIT (Appeals) thus held that in view of the ratio laid down by the Tribunal in assessee s own case, which has been affirmed by the Hon'ble Punjab Haryana High Court in judgment reported in 323 ITR 518 (P H), in assessee s own case, there was no merit in any disallowance u/s 14A of the Act. 9. In the totality of the facts and circumstances of the present case where the assessee has explained the source of investment in the equities, income from which is exempt from tax and similar investment being made in the earlier years wherein no disallowance was found to be merited u/s 14A of the Income Tax Act, no further disallowance is warranted in the hands of the assessee. The Tribunal in assessee s own case relating to assessment year 2004-05 in ITA No.247/Chd/2008 - order dated 4.7.2008 had deleted the disallowance made u/s 14A of the Act. The Hon'ble Punjab Haryana High Court in assessee s own case relating to assessment year 2004-05 (supra) had confirmed the order of the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as company s internal accruals. vii) There is no instance of any utilization of amount, which has been borrowed from the bank specifically for the business purposes of the company, for unspecified purposes being investments. 24. In view of the above position, the disallowance of interest at ₹ 30864538/- made by the A.O. u/s.14A of the Act cannot be held to be justified and disallowance on merits therefore also deleted. Thus grounds 1, 2(a) (b) stands allowed in favour of the appellant. 10. The learned D.R. for the Revenue had not controverted the findings of the CIT (Appeals) and in the absence of the same we find no merit in the ground of appeal raised by the Revenue. 11. The only ground of appeal raised by the assessee in Cross Objection is as under : That the Ld.CIT(A)-II has erred in confirming the disallowance of ₹ 2,00,000/- towards Administrative Expenses on estimate basis ignoring the facts that assessee has already disallowed a sum of ₹ 1,52,06,451/- on account of expenses incurred in relation to exempt income. 12. We find that the Hon'ble Bombay High Court in Godrej Boyce Mfg.Co.Ltd V DCIT Anr, [234 CTR 1 (Bom) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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