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2016 (8) TMI 56

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..... 009 (1) TMI 4 - BOMBAY HIGH COURT ), it can be presumed that no borrowed funds were used to make such investments. As per Hon'ble Bombay High Court, the principle is that, if there are funds available both interest free and interest bearing, then a presumption can be drawn that investments are made out of interest free funds, so long as such interest free funds are sufficient to meet the investments. In our considered opinion, having regard to the fact position brought out by the CIT(A), the proposition laid down by the Hon'ble Bombay High Court in the case of Reliance Utilities And Power Limited(supra) is fully attracted in the present case. Such fact-situation has been enumerated by the CIT(A) in Para 3.4 of his order, which depicts the s .....

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..... s of construction and real estate development; 2. failed to appreciate that the provisions of sub rules (2) and (3) of Rule 8D of the Rules read with section 14A(2) of the Act cannot be invoked, in absence of any satisfaction by the learned Assessing Officer under section 14A(1) of the Act read with Rule 8D(1) of the Rules; 3. without prejudice to the above, should have appreciated that only the investments on which exempt income is earned during the year, should be considered while computing disallowance under rule 8D; 4. without prejudice to the above, should be directed to restrict the disallowance to a nominal amount as no dividend was earned during the year and no further activities were done in respect of investments made. .....

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..... he assessee's appeal is concerned, although multiple Grounds have been raised, but the solitary grievance is with regard to the action of the CIT(A) in sustaining the disallowance of ₹ 33,93,829/- under section 14A of the Act . 3.1 In this regard, brief facts are that the Assessing Officer noted that assessee had invested in shares, which would yield exempt income and, therefore, according to him the disallowance under section 14A of the Act was merited. Accordingly, he worked out the disallowance under section 14A by applying the formula contained in Rule 8D(2)(iii) of the Income Tax Rules, 1962 ( in short 'the Rules') on account of indirect expenses amounting to Rs. ₹ 33,93,829/- 4. In appeal before the CIT(A), the assessee .....

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..... has placed reliance on the judgment of the Hon'ble Bombay High Court in the case of CIT vs. Delite Enterprises, ITA NO.110 of 2009 dated 26/02/2009, wherein non-application of section 14A has been upheld in the absence of any exempt income for the relevant assessment year. The Ld. Representative for the assessee also relied upon the judgment of the Hon'ble Delhi High Court in the case of CIT vs. Holcim India P. Ltd. in ITA No.486/2014 & ITA 299/2014 dated 05/09/2014, wherein also similar proposition has been upheld. On the aforesaid primary point itself, we find no reason to uphold the impugned disallowance made by the income tax authorities by invoking section 14A of the Act. Accordingly, the disallowance of ₹ 33,93,829/- sustai .....

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..... penditure under section. 36(1)(iii) of the Act. A sum of ₹ 6,93,624/- related to investment made in Alspon Infrastructure and ₹ 62,56,945/- for investment in Ashford Infotech(P) Ltd. Subsequently, the Assessing Officer, on application filed by the assessee under section 154 of the Act, deleted the addition of ₹ 6,93,624/- relating to the investment in Alspon Infrastructure. 11. Before the CIT(A), assessee raised various submissions on facts and in law. The assessee pointed out that a sum of ₹ 50.00 crores was given to its subsidiary Ashford Infotech (P) Ltd by way of share application money and such subsidiary was also engaged in the business of construction and development of real estate. For the said reason, it wa .....

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..... see whereby, assessee had owned interest free funds of ₹ 193.70 crores and investment in subsidiary was ₹ 135.00 crores. On this basis, the CIT(A) has concluded that assessee had sufficient own funds and , therefore, following the judgment of Hon'ble Bombay High Court in the case Reliance Utilities And Power Limited(supra), it can be presumed that no borrowed funds were used to make such investments. As per Hon'ble Bombay High Court, the principle is that, if there are funds available both interest free and interest bearing, then a presumption can be drawn that investments are made out of interest free funds, so long as such interest free funds are sufficient to meet the investments. In our considered opinion, having reg .....

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