9911796707
TMI Blog2015 (3) TMI 1277X X X X Extracts X X X X X X X X Extracts X X X X ..... 65,257/- and paid interest of ₹ 80,17,792/- which resulted into net interest income of ₹ 1,71,47,465/-. Most of the investment was out of interest free funds available with it and even in respect of the part of the investment made out of borrowings, since the assessee has earned interest income thereon which was more than what was paid against the borrowing, no disallowance is warranted under rule 8D. AO is empower to make disallowance u/s.14A r.w.r.8D only if the assessee has debited certain interest expenditure which are attributable to earning the exempt income. In case the assessee has not claimed any interest expenditure attributable to earning exempt income, no disallowance is warranted under rule 8D. For the admin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of balancesheet of the assessee, it is noticed the assessee has invested funds in giving loans and advances, fixed assets and also in partnership firm in the form of capital and current account. Thus, assessee has investments in his balancesheet, income from which is exempt from tax (i.e. share of profit from firm). Also, on perusal of profit and loss account, it is noticed that assessee has claimed huge interest expenditure, salary, general expenses, staff welfare etc. also. But the assessee has claimed all such expenditure against taxable income only and no expenses were disallowed by him as incurred in relation to those investments income from which is non-taxable. It is' also noticed from balancesheet that a major amount is investe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r making other interest bearing investments-viz. granting loans to third parties. As per ld. AR, the interest free owned funds had been utilized for making investments in the partnership firms in order to earn taxable interest income. Further, the fact that, even though some of the borrowings made from Bapa Real Estate Pvt. Ltd. had been utilized for making investments in the partnership firm in the current year, the fact that such investments had also earned taxable income and not exempt income for the assessee, cannot be overlooked. Based on the above analysis of balance sheet and in the facts that, assessee had not advanced any funds/made investments, which are of the interest free nature and further the fact that, during the year, no ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so made by the AO, insofar as rule 8D can be applied only when assessee has claimed certain expenditure against earning of exempt income. In the instant case, the AO has made disallowance under Rule 8D on the plea that the assessee has made investment in partnership firm, income of which is exempt. We found that on the capital so invested in the partnership firm, the assessee has earned substantial interest income which is liable to tax. As per the audited profit and loss account placed in the record, we found that assessee has earned gross interest income of ₹ 2,51,65,257/- and paid interest of ₹ 80,17,792/- which resulted into net interest income of ₹ 1,71,47,465/-. Most of the investment was out of interest free funds a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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