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TMI Blog2016 (10) TMI 986X X X X Extracts X X X X X X X X Extracts X X X X ..... erred in making addition u/s 14A r.w.s Rule 8D amounting to Rs. 2,14,34,865/- without recording satisfaction u/s 14A, without observing that no expenditure was incurred by the Appellant and also without considering investment in subsidiary companies amounting to Rs. 24,06,43,104/-. Without prejudice to above and alternatively, 2) In the facts and circumstances of the case and in law, the learned Assessing Officer erred in wrongly disallowing the interest u/s 36(1)(iii) to the tune of Rs. 84.99,516/- on the loan taken for the purpose of business, however to optimize the interest cost of' borrowing, a part of' the same was parked in Term Deposit of a Bank to achieve the objective of liquidity and therefore no disallowance could have been made. 3) In the facts and circumstances of' the case and in law, the learned Assessing Officer erred in wrongly treating Interest received and paid as "Income from other Sources" instead of "Profits and gains from "Business and Profession" even though the Appellant is not in the business of' money lending and interest on bank deposits out of temporary idle funds obtained by the Appellant cannot be termed as "income from other source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest expenditure completely. Therefore the disallowance made of Rs. 47,36,853/- is on assumptions and presumptions and hence deserves to be deleted. 5. The Ld. CIT(A) has erred in law and on facts in confirming the alleged disallowance of estimated expenditure by invoking provisions of section 14A of the Income Tax Act, 1961 read with Rule 8D. The disallowance is on surmises and assumptions, without any nexus to the earning of dividend income of Rs. 28,666/-and therefore deserves to be deleted. 6. The appellant contends that it has furnished working of expenditure of Rs. 20,064/- based on accounts which was simply brushed aside by the AO as well as CIT(A) without there being any reasons for dissatisfaction against the same. Therefore the disallowance made is wrong and bad in law and hence deserves to be deleted. 7. Without prejudice to the above grounds that no disallowance should be made u/s 14A, the appellant contends that the working under Rule 8D is wrong, excessive and requires to be revised. The disallowance if any should be restricted to Rs. 20,064/-. 8. The above grounds are independent and without prejudice to one another. 9. The appellant contends that he may be allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 34,74,92,451/- on which the assessee has earned interest at 7% only. Assessee was called upon to explain as to why the differential amount of Rs. 82,49,630/- should not be disallowed. Finding explanation furnished by the assessee not tenable, AO disallowed the differential interest of Rs. 82,49,630/- and assessed the total income at Rs. 2,28,83,520/-. BRIEF FACTS OF ITA NO.781/DEL./2014 4. Briefly stated the facts of this case are : during scrutiny proceedings, it was noticed by the AO that assessee, though into the business of trading of sugar, but as per P&L account, it has earned income only from interest and dividend. As per balance sheet, there are unsecured loans received and lent by the assessee to the tune of Rs. 4,97,00,000/- and Rs. 2,14,86,133/- respectively. At the beginning of the year under assessment, there was outstanding loan of Rs. 46,90,10,257/- and the assessee availed loan of Rs. 4,22,00,000/- and returned loan of Rs. 40,15,10,257/- with outstanding balance of Rs. 4,97,00,000/-. Assessee paid interest @ 12% on these loans amounting to Rs. 2,84,17,666/- without showing any direct nexus of the utilization of the loan accepted and the major component of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance is to be restricted to the dividend income and relied upon the following orders passed by ITAT :- (i) DCM Limited vs. DCIT - ITA No.4467/Del/2012 - ITAT 'B' Bench, Delhi order dated 01.09.2015 (Relevant page 11); (ii) M/s. Daga Global Chemicals vs. ACIT - ITA No.5592/Mum/2012 - ITAT 'D' Bench Mumbai order dated 01.01.2015 (Relevant page 4); (iii) Joint Investment Pvt. Ltd. vs. CIT - Hon'ble Delhi High Court vide Order dated 25.02.2015 (2015) 372 ITR 0694; However, on the other hand, ld. DR relied upon the order passed by the ld. CIT(A). GROUND NO.1 OF ITA NO.993/MUM./2012 & GROUNDS NO.5 TO 7 OF ITA NO.781/DEL./2014 9. Undisputedly, there is no increase in the investment during the years under assessment i.e. 2008-09 and 2009-10; that the assessee has received dividend income of Rs. 28,666/- and claimed as exempt u/s 10(34); that the assessee has made investment in the quoted and non-quoted shares of Rs. 26,73,81,446/- in the sister/ associate concerns; that the annual accounts, tax audit report and books of account relied upon by the assessee have not been disputed by the AO; that the assessee has not claimed any expenditure incurred to earn the exempt dividen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment and has not incurred any expenditure, the question of resorting to estimation by the AO does not arise particularly when AO has neither disputed the audited books of account maintained by the assessee in respect of investment and dividend income nor AO has recorded his dis-satisfaction as to how any expenditure has not been incurred by the assessee in maintaining the investment. In the given circumstance, the disallowance u/s 14A cannot exceed the amount of Rs. 28,666/- already claimed exempt u/s 10(34). 14. CIT (A) has also failed to appreciate the arguments addressed by the assessee that when no fresh investment has been made by the assessee during the year under assessment nor it has incurred any expenditure the question of invoking provisions contained under section 14A read with Rule 8D does not arise. 15. Now, the next question arises for determination in this case is :- "as to whether without prejudice to ground no.1 of appeal no.993/Mum./2012 qua AY 2008-09 and grounds no.1, 2 & 3 raised in appeal no.781/Del./2014 qua AY 2009-10, the assessee is entitled for deduction of interest to the tune of Rs. 84,99,516/- qua AY 2008-09 and Rs. 47,36,853/- qua AY 2009-10 claime ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned 7% only. The assessee set off the short fall in the income at Rs. 82,49,630/- earned from sugar trading at commodity exchange. 19. The only ground on which the AO/CIT(A) has disallowed the interest is that the loans were utilized for non-business activities. When undisputedly the loans were kept in FDR, which are in the shape of ready funds available with the assessee to be used for business purpose at the opportune time the assessee being in trading, cannot be treated as non-business purpose in any manner whatsoever, particularly when the funds have not been diverted to any third party. Moreover, the AO has not come up with any material to prove that the borrowed funds have been used for non-business purpose. 20. In the totality of circumstances, we are of the opinion that the complete nexus has been established between the funds borrowed and fund parked in the FDRs to be utilized for business purpose at the time of opportune time. So, in these circumstances, the revenue authority was not justified in disallowing the interest claimed by the assessee both in AY 2008-09 and AY 2009-10. So, grounds no.2 & 3 of appeal no.993/Mum./2012 qua AY 2008-09 and grounds no.1, 2, 3 & 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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