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TMI Blog2020 (3) TMI 628X X X X Extracts X X X X X X X X Extracts X X X X ..... The order of the Hon'ble Commissioner of Income Tax (Appeals! is contrary to law and facts. 2. The Hon'ble Commissioner of Income Tax (Appeals) erred in sustaining the addition of Rs. 36,38,000/- under section 14A (in relation to the dividend amount of Rs. 40,62,190/-) since all the investments held by the appellant were funded entirely by company's own funds and no borrowed funds were used for making the investments, as is evident from the facts already submitted to the Assessing Officer and the Commissioner of Income Tax (Appeals) with respect to source and deployment of funds. 3. The Learned Commissioner of Income Tax (Appeals) erred in not appreciating that once no borrowals were used to make the investments, the question of disallowance under Section 14A will not arise and hence any such disallowance will be contrary to facts and will be based purely on erroneous presumption. 4. The Hon'ble Commissioner of Income Tax (Appeals) is not justified in sustaining the disallowance despite the fact that the financial statements and the details of the source of funding the investments furnished by the Appellant prove that no borrowing was used therefor. 5. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly prayed that the addition of Rs. 36,38,000/- made by the Assessing Officer under section 14A in the regular computation as .well as for Book Profits purposes be deleted. 11.The appellant craves leave to add, alter, delete or withdraw any of the grounds of appeal." 3. Briefly stated facts of the case are that the assessee is engaged in business of manufacture and sale of cotton yarn. The only issue agitated in this appeal is with respect to disallowance of expenses incurred in relation to earning of an exempt income, u/s.14A of the Act read with Rule 8D(2) of the Income-tax Rules, 1962 under the normal provisions and also corresponding additions made to 'Book Profit' by invoking provisions of Sec.115JB of the Act for computing book profit for levying minimum alternate tax. The AO had invoked provisions of Sec.14A r.w.r. 8D(2)(ii) & (iii) of the Income-tax Rules, 1962 to make disallowance of expenses to the tune of Rs. 36.38 lakhs both under normal provisions as well while computing book profits for computing MAT payable u/s 115JB of the 1961 Act, vide assessment order dated 29.12.2016 passed by AO u/s 143(3) of the 1961 Act, which is reproduced hereunder: "3.6 Accordingly, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 9.35 Crs. during the year on 07.11.2013, copy of sale deed along with bank statements is placed on record at page 32-68 of paper book and it is claimed that the aforesaid funds were used for making investments during the year to the tune of approx.. Rs. 8 Crs. The assessee has filed written submissions before the Bench and the reliance is placed on the aforesaid contentions, which is extracted hereunder: Table D- Details of proceeds from sale of land during the year Particulars Amount Sale Value of Land as per Sale Deed dated 07-1 1-2013 9,35,19,500 Less:-TDS@ 1% (9,35,195) Net sale consideration from sale of land credited to bank account on 09-11-2013- sale proceeds 9,25,84,305 Date of Credit of the above sale proceeds in Bank Account 09-11-2013 Table E-Dates on which fresh investments made during the year out of proceeds from sale of land Name of company in which investment is made Amount (in Rs.) Sub-total (in Rs.) Date on which fresh investment made during the year Ramco Windfarms Ltd. 5,75,000 5,75,000 30/12/2013 JRK Enterprises Limited-equity shares 100 100 28/01/2014 JRK Enterprises Limited-Preference shares 1,20,00,000 7,95,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and Surpluses ( preceding year 11.71 crores) and the assessee had investments of Rs. 8.34 Crs. as on 31.03.2014 while investments were to the tune of Rs. 34.19 lakhs as on 31.03.2013. Further, we have observed that assessee has sold an property for Rs. 9.35 crores during the year under consideration. The assessee has filed bank statements and sale deed to evidence sale of property and investments made during the year under consideration. We have observed that allegations made by Revenue are that the assessee has used mixed funds for the purpose of making investments in the securities which are capable of yielding exempt income. The Revenue could not demonstrate co-relation between the utilization of interest bearing borrowed funds with the investments made. We have observed that the major investments were made during the year under consideration and assessee had also sold its property for consideration of Rs. 9.35 crores during the year under consideration. We are of the considered view that assessee has demonstrated with cogent evidences that the assessee has its own interest free funds which are higher than investments and presumption will apply that assessee has invested its ..... X X X X Extracts X X X X X X X X Extracts X X X X
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