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TMI Blog2018 (7) TMI 1868X X X X Extracts X X X X X X X X Extracts X X X X ..... wance whereas the assessee has been successful in demonstrating that in view of having sufficient interest free capital and reserve, disallowance of interest expenditure was not called for. We accordingly delete the interest disallowance - Decided in favour of assessee Disallowance invoking provisions of section 14A read with Rule 8D on the purchase of agriculture land - Held that:- No interest disallowance was called for. We, however, confirm the disallowance of ₹ 69,056/- being 0.5% of the investment in agricultural land as there are certain expenditure which gets inter-mingled with administrative expenditure incurred by the assessee during the year are for the purpose of earning agricultural income. This ground of the assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that since the Hon'ble High Court has held that as no exempt income has been earned during the year under consideration, no disallowance was called for u/s 14A of the Act. 5. On the other hand, the learned DR relied upon the orders of the authorities below with the submission that it was only after considering each and every aspect of the issue that the Assessing Officer and the learned Commissioner of Income Tax (Appeals) have rightly made and confirmed the disallowance u/s 14A and as such no interference is called for. 6. We have heard both the parties and perused the material available on record. After going through the judgment of the Hon'ble High Court of Delhi in the case of Cheminvest Limited (supra), we find that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Assessing Officer, therefore, was of the view that this difference in rate of interest being not beneficial to the revenue, he computed the disallowance of interest at ₹ 1,38,128/-. On appeal, the learned Commissioner of Income Tax (Appeals) confirmed the disallowance. Now the assessee is in appeal before the Tribunal. 8. On the other hand, the learned DR relied upon the orders of the authorities below. 9. We have heard both the parties and perused the material available on record. From a perusal of record we find that the Assessing Officer has not brought out any specific details which could show that the interest bearing funds have been applied to be given to the loan given to another director @ 9%. Reasonableness of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... called for. We accordingly delete the interest disallowance of ₹ 1,38,128/- and allow ground no. 1 in favour of the assessee. 10. Ground no. 2 raised by the assessee relates to confirmation of disallowance of ₹ 4,58,363/- by invoking provisions of section 14A read with Rule 8D on the purchase of agriculture land. 11. The Assessing Officer observed that the assessee has earned exempted income of ₹ 2,02,340/- and, therefore, applying the provisions of section 14A of the Act computed the disallowance of ₹ 4,58,363/- which comprised of interest disallowance of ₹ 3,89,307/- and administrative expenditure disallowance of ₹ 69,056/-. 12. We have heard both the parties and perused the material available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest payments under section 14A was to be set aside. Also Hon'ble Gujarat High Court in case of CIT vs. UTI Bank Limited (2013) 215 Taxman 8 (Gujarat) MAG ) has held that if there are sufficient interest free funds to meet tax free investments they are presumed to be made from interest free funds and not loaned funds and no disallowance can be made under section 14A. In case of CIT vs. Bombay Oil Industries (222 Taxman 38) (Bom) it is held that where interest free funds are available with an assessee sufficient to meet its investments and at same time loans are taken, then a presumption would arise that investment has beenb made out of interest free funds available with company and not out of loans. Attention is also invited ..... X X X X Extracts X X X X X X X X Extracts X X X X
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