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TMI Blog2016 (9) TMI 1205X X X X Extracts X X X X X X X X Extracts X X X X ..... come. As the assessee has claimed exempt dividend income of ₹ 6,75,076/- and exempt long term capital gain of ₹ 19,62,821/-. The AO, however, made a disallowance of ₹ 2,65,36,592/- in relation to expenditure incurred for earning of the above exempt income. The assessee itself has disallowed an amount of ₹ 4,70,062/- in its computation of income. Considering the proposition of law laid down the disallowance in this case is restricted to the extent that is suo-moto offered by the assessee at ₹ 4,70,062/-. In view of the above, the appeal of the assessee is treated as partly allowed - ITA Nos.26 & 27/M/2015, ITA Nos.18 & 19/M/2015 - - - Dated:- 19-8-2016 - SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an amount of ₹ 4,70,062/- in its computation of total income. However, the AO did not agree with the above submission of the assessee. He computed the disallowance as per the provisions of section 14A read with rule 8D of the Income Tax Rules, 1962 of ₹ 2,65,36,592/-. However, since the assessee at its own had already disallowed a sum of ₹ 4,70,062/-, the AO made the addition of the remaining amount of ₹ 2,60,66,530/-. Being aggrieved by the above disallowance made by the AO, the assessee preferred appeal before the Ld. CIT(A). 5. It was pleaded before the Ld. CIT(A) that the investments were made by the assessee in its own subsidiaries and associates that certain investments were not capable of earning of exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowance of interest expenditure under section 14A. 7. Being aggrieved by the above decision of the Ld. CIT(A), the assessee has come in appeal contending that since the own funds of the assessee were more than the investments made, hence as per the law laid down by the Hon ble Bombay High Court in the case of CIT vs. Reliance Utilities and Power Ltd. (supra), the presumption would be that the assessee had used its own funds for the purpose of making investments; hence, no disallowance of interest expenditure under section 14A was attracted in the case of the assessee. It has been further pleaded that since the investments have been made in subsidiary and associate companies which were strategic investments and the same were not made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- and as on 31.03.10 were at ₹ 93,23,07,397/-. A perusal of the above, reveals that the own funds of the assessee at the end of the financial year have increased, whereas the investments at the end of year have decreased to some extent. Moreover, the amount of investments is much lower than the own funds available to the assessee. The Hon ble Bombay High Court in the case of CIT vs. Reliance Utilities and Power Ltd. (2009) 313 ITR 340 (Bom) has held that if there are funds available, both interest free and over draft and/or loans taken, then a presumption would arise that investments would be out of the interest free fund generated or available with the company, if the interest free funds were sufficient to meet the investment. Sim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble Allahabad High Court in the case of CIT Kanpur vs. M/s. Shivam Motors Pvt. Ltd. in ITA No.88 of 2014 vide order dated 05.05.2014; by the Hon ble Gujarat High Court in the case of CIT vs. Corrtecth Energy Pvt. Ltd. in ITA No.239 of 2014 vide order dated 24.03.2014 and by the Hon ble Bombay High Court in the case of CIT vs. M/s. Delite Enterprises in ITA No.110 of 2009 vide order dated 26.02.09. 11. We find that in the case in hand, the assessee has claimed exempt dividend income of ₹ 6,75,076/- and exempt long term capital gain of ₹ 19,62,821/-. The AO, however, made a disallowance of ₹ 2,65,36,592/- in relation to expenditure incurred for earning of the above exempt income. The assessee itself has disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X
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