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TMI Blog2016 (6) TMI 1083X X X X Extracts X X X X X X X X Extracts X X X X ..... the higher side. Considering the totality of the facts of the case, disallowance of ₹ 50,000/- out of the agricultural income declared by the assessee in our opinion will meet the ends of justice. Disallowance u/s 14A - Held that:- Following the above decision the Hon’ble Bombay High Court in the case of HDFC Bank Ltd. (2014 (8) TMI 119 - BOMBAY HIGH COURT ) has held that where assessee’s capital and free reserves are higher than the investment in tax free securities, it would have to be presumed that investment made by the assessee would be out of the interest free funds available with assessee and no disallowance is warranted u/s.14A. Since the capital of the assessee in the instant case is admittedly much more than the investment in shares, the dividend income of which is tax free, therefore, respectfully following the decisions of the jurisdictional High Court cited (Supra) we hold that no disallowance of interest u/s.14A is required. So far as the administrative expenses is concerned, we find the AO has disallowed ₹ 30,475/- which has been upheld by the CIT(A). Although it is the submission of the Ld. Counsel for the assessee that no expenditure has been in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the return of income by the appellant. 3. Facts of the case, in brief, are that the assessee is an individual and engaged in the business of construction activities. During the course of assessment proceedings the AO noted that assessee has shown agricultural income of ₹ 4,52,530/-. He therefore asked the assessee to explain the details in respect of the agricultural income earned and produce the documentary evidence in respect of his claim. The assessee submitted the copies of 7/12 extracts of the land. It was submitted that the land is very fertile and assessee used to cultivate rich crops like Mango and Soyabean. Since the assessee could not produce any documentary evidence such as details of income, expenses, bills and vouchers etc. the AO treated an amount of ₹ 1 lakhs out of the agricultural income declared at ₹ 4,52,530/- as income from other sources and made addition of the same to the total income of the assessee. 4. Before CIT(A) the assessee submitted that he owns 27 Acres of irrigated land at Nilwandi. Since the assessee is not maintaining books of account to record the various expenses etc. those details could not be produced. However, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oks of accounts and not keeping any records for the income and expenditure, therefore, it was not possible to substantiate the same with documentary evidence. However, considering the extent of agricultural land holding by the assessee the same being reasonable should be accepted as proper and no disallowance should be made. He also filed 7/12 extracts of the land containing the nature of crop grown such as Soyabean Mango etc. 7. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). He submitted that since the assessee is not maintaining any books of account for the agricultural income and could not substantiate either before the AO or before the CIT(A) with documentary evidence, therefore, disallowance of ₹ 1 lakh under the facts and circumstances of the case is justified. 8. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We find the assessee has declared agricultural income of ₹ 4,52,530/- in the return of income out of which the AO disallowed an amount of ₹ 1 lakh treating the same as income from other sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urred for earning exempted income attributable to holding of such investments, the AO asked the assessee to explain as to why disallowance u/s.14A should not be made. It was submitted by the assessee that the investments in shares/mutual funds are old and the assessee is having sufficient own capital and therefore no disallowance is called for. 11. However, the AO did not accept the plea of the assessee. According to him, the assessee has not maintained any separate accounts by way of which the management and administrative expenditure could be segregated. Further, the assessee had borrowed certain funds on which liability to pay interest is being incurred whereas certain amounts had been invested in earning tax free dividend income. Therefore, a part of the interest liability would be on account of investments made for earning tax free dividend income. Rejecting the various explanations given by the assessee the AO disallowed interest amount of ₹ 2,28,276/- and administration expenses of ₹ 30,475/- totaling to ₹ 2,58,751/-. 12. In appeal the Ld.CIT(A) upheld the action of the AO by observing as under : 8.2 I have carefully considered the facts of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest free funds available to an assessee sufficient to meet its investments and at the same time the assessee had raised a loan, it can be presumed that the investments were from interest free funds available. Therefore, if there were funds available, both interest free and overdraft and/or loans taken, then presumption would arise that investments would be out of the interest free funds generated or available with the company, if the interest free funds were sufficient to meet the investments. He accordingly submitted that no disallowance of interest can be made u/s.14A of the I.T. Act. 15. So far as administrative expenses are concerned, he submitted that no part of such administrative expenses is required to be incurred for earning the tax free income. 16. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). 17. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. There is no dispute to the fact that the investment in shares and mutual funds as on 31-03-2010 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or section 37(1) of the Act. 21. Facts of the case, in brief, are that the AO during the course of assessment proceedings noted that the assessee has shown an amount of ₹ 4,13,218/- towards bad debts. On being confronted the assessee furnished details of such bad debts. The AO noticed from the details that the debts claimed are on account of advances given to the contractors and excess amount paid against the bills of the contractors. Thus, according to the AO bad debts are not part of sale and not included in the total income of any previous year. The assessee also could not substantiate anything for recovery of the said debt. In absence of any proof the AO held that the debt cannot be said as bad. He accordingly disallowed the claim of bad debt of ₹ 4,13,218/-. 22. In appeal the Ld.CIT(A) upheld the action of the AO by observing as under : 10.2 I have carefully considered the facts of the case, the assessment order and oral as well as written submissions on behalf of the appellant. The appellant s claim of bad debt is not in accordance to the provision of Sec.37(1)(vii) r.w.s.36(2) of the Act. Similarly, appellant s claim of deduction of bad debt u/s.28 or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar which is not recoverable and the excess amount paid to the suppliers can be considered as business loss. 27. It is the settled proposition of law that for claiming bad debt the assessee is only to write off the bad debt in the profit and loss account and he is not required to prove that the same has infact become bad. However, for claiming the business loss, the onus is always on the assessee to prove that the amounts written off in the books is infact business loss. The assessee has to prove that he has taken reasonable steps for recovery of the same and was unsuccessful and nothing can be recovered from the party for which he has written off the same as business loss. However, from the submission made by the assessee, it does not appear that the assessee has conclusively proved that the amount has been written off after taking reasonable steps for recovery of the same. Before the AO the assessee has not made any such claim and although it was argued before the CIT(A) he has rejected the claim of the assessee on the ground that these amounts written off are not in the nature of expenditure and therefore cannot be allowed u/s.37(1) of the Act. Considering the totality of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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