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TMI Blog2020 (4) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee: "1. The ld. CIT (Appeals) of Income Tax erred in disallowing the interest payment of Rs. 3,05,12,745/- keeping in view the interest free advances given by the appellant company. Full arguments will be advanced at the time of hearing. 2. The ld. CIT (Appeals) of Income Tax erred in ignoring the fact that the appellant had advanced the loans and advances from its own funds and not out of the borrowed funds." 3. In ITA No. 2105/Del/2017, following grounds have been raised by the assessee: "1. The ld. CIT (Appeals) of Income Tax erred in disallowing the interest payment of Rs. 69,73,346/- keeping in view the interest free advances given by the appellant company. Full arguments will be advanced at the time of hearing. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... detailed submissions will be made at the time of hearing." 6. The issues involved in these appeals to be adjudicated are, i. Disallowance of interest payment on the interest free advances given by the assessee. ii. Disallowance u/s 14A of the Income Tax Act, 1961 more than the disallowance made by the assessee suo moto. 7. The assessment year 2012-13 is taken as the lead case for the sake of convenience on the issue of interest payments. 8. Brief facts of the case taken from the record are that, during the relevant financial year, the assessee earned interest income of Rs. 8,73,13,968/- and also debited interest expenses of Rs. 16,31,794/-. From the details of interest paid furnished during the course of assessment proceedings, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces were given from own funds and no nexus has been proved. 10. Before us during the argument, the ld. AR submitted that the details of the own funds available with the assessee. The ld. DR supported the order of the ld. CIT (A). The details of own funds and loans given are as under: Details of Interest Free reserves available with the appellant 11. We find that the loans and advances including interest free advances are far less than the own funds. And hence, the presumption that the own funds have been utilized for extending the loans and advances sets in. When the assessee has got own funds available at their disposal, no disallowance is called for as enunciated in various judgments. The decision of Hon'ble Punjab & Haryana High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestments, the allocation of expenses or disallowance of expenses on these investments is not at all justified. The Assessing Officer observed that the auditor has given the note in the year under consideration and in the Assessment Year 2012-13, that expenses were disallowed @ 0.5% in clause 17(1) of the audit report u/s 44AB in form 3CB/3CD. Hence, 0.5% of average value of investments which comes to Rs. 44,90,230/- was disallowed as against Rs. 4,10,947/-. The Assessing Officer relied on the judgment of Hon'ble Supreme Court in the case of CIT vs. United Trust Ltd 200 ITR 488 on preposition that proportionate management expenses should be deducted from gross dividend for the purpose of the deduction. 14. The ld. CIT (A) finds that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued that keeping in view the judgment of the Special Bench of ITAT in the case of Vireet Investment Pvt. Ltd. in ITA No. 502/Del/2012 vide order dated 16.06.2017, the non-dividend yielding investments ought to have been excluded. 16. Heard the arguments of both the parties and perused the material available on record. 17. The closing value of opening value of investment and average investment are as under:- Closing value of investments Rs. 99,12,68,846 Opening value of investments Rs. 80,48,23,266 Average value of investments Rs. 89,80,46,056 18. The assessee has disallowed the expenses u/s 14A of Rs. 4,10,947/-. Since, the assessee has not given any basis so Assessing Officer applied Rule 8D(2)(iii) and worked out disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id decision it has been held:- "As regards the second question, Section 14A of the Act provides that for the purposes of computing the total income under the Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. Hence, what Section 14A provides is that if there is any income which does not form part of the income under the Act, the expenditure which is incurred for earning the income is not an allowable deduction. For the year in question, the finding of fact is that the assessee had not earned any tax free income. Hence, in the absence of any tax free income, the corresponding expenditure could not be worked out for d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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