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TMI Blog2017 (11) TMI 1818X X X X Extracts X X X X X X X X Extracts X X X X ..... t interest free funds at its disposal. Similar view was taken in the case of Hero Cycles Pvt. Ltd. [ 2015 (11) TMI 1314 - SUPREME COURT] once it is a established that there is a nexus between the expenditure and the purpose of the business no disallowance is called for. Thus the disallowance made on account of interest is hereby deleted. Addition under section 14A - disallowance based on the calculation made as per Rule 8D(2) taking the total interest expenditure, average value of investments, average value of assets and half percentage of average value of investments into consideration - HELD THAT:- Delhi High Court in case of Joint Investments Pvt. Ltd. Vs. CIT [ 2015 (3) TMI 155 - DELHI HIGH COURT], AMAR PACKAGING PVT. LTD. [ 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not justified to arbitrarily uphold disallowance made by the Ld. AO u/s 36(1)(iii). (a) of ₹ 1,51,71,075/- on account of interest on investments. (b) of ₹ 40,60,316/- on account of interest on interest free advances / loans to sister concerns / related parties. 4. Ground No. (a) in ITA No. 173/CHD/2016 for the AY 2011-12 has been withdrawn by the assessee. 5. Ground No. (b) in ITA No. 173/CHD/2016 for the AY 2011-12 deals with interest on investment. 6. Brief facts of the case are that the Assessing Officer observed that the assessee had total investment of ₹ 44,51,76,925/- and asked the assessee to justify the claim of expenditure under section 36(1)(iii) of the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it cannot be distinguished whether surplus funds or borrowed funds are used for the said investments cannot be accepted in view of the further development of the judicial pronouncements on the issue. When the assessee has got own funds available at their disposal no disallowance is called for as enunciated in various judgments. In the case of Bright Enterprises Pvt. Ltd. Vs. CIT (Punjab Haryana High Court in ITA No. 224/2013 dt. 24/07/2015 it was held that if there are interest free funds available then it will be presumed that these have been made out of interest free funds. Similar view was held in the case of CIT Vs. Kapsons Associates Investment Pvt. Ltd. [2015] 381 ITR 204 (P H) wherein, the Hon ble Court has held that interest on i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... funds being used for investments and to account for exempt income. He further argued that there is no basis for the disallowance made by the assessee under section 14A. Ld. DR further argued that a) One by simply assuming that the facts in the case of the assessee in AY 2008-09 is similar to the facts in present AY 2011-12 which is actually not so as has been discussed above. b) Secondly by not considering the decision of Hon ble Jurisdictional High Court in the case of Avon Cycles(supra) the facts of which are similar to the facts of the assessee in the present assessment year. c) Thirdly, by relying on the decisions of Hon ble ITAT and Hon ble Punjab and Haryana High Court in the case of the assessee for A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court in case of Joint Investments Pvt. Ltd. Vs. CIT, 372 ITR 694 (Del), Amar Packaging Pvt. Ltd. Vs. ITO in ITA No. 2358/Del/2013 (ITAT Delhi Bench), and also in case of Daga Global Chemical Pvt. Ltd. (ITAT Mumbai Bench) in ITA No.5592/MUM/2012 has taken view that disallowance cannot exceed the exempt income. Hence keeping in view the abovementioned judgments it is hereby directed the disallowance under section 14A read with Rule 8D be restricted to the exempt income earned by the assessee. The appeal of the Revenue is allowed for statistical purposes. 18. As a result the appeal of the assessee is allowed and that of the Revenue is allowed for statistical purposes. Order pronounced in the open court. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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