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TMI Blog2020 (10) TMI 247X X X X Extracts X X X X X X X X Extracts X X X X ..... ed funds not utilised for business purposes of the assessee - Disallowance u/s.36(1)(iii) or alternatively u/s.14A - interest free funds available with the assessee were much more than the investments made by the assessee in subsidiary companies OR not? - whether borrowed funds were utilised in equity of subsidiaries and thus the assessee is entitled to dividend income therefrom which is exempt u/s.10(34) ? - HELD THAT:- AO has disallowed the interest on the entire investment though according to the assessee, the cash credit account contains both interest free as well as interest bearing funds. As held in SA Builders [2006 (12) TMI 82 - SUPREME COURT ] where the interest free funds and interest bearing funds are mixed and the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee as well as the Revenue. Since the facts and issues involved in all these appeals except for the amounts mentioned therein are common and identical, all these appeals were heard together and are being disposed-of by way of this common and consolidated order. For the sake of convenience, appeal of the assessee in ITA No.2132/Hyd/2017 (AY.2010-11) is discussed hereunder in detail. 2. Brief facts of the case are that, the assessee-company, engaged in the business of Production and Broadcasting of Television Content, filed its return of income electronically for the AY.2010-11 on 30-09-2009, admitting total loss of ₹ 5,02,78,869/-. 3. During the course of assessment proceedings u/s.143(3) of the Income Tax Act [Act], the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to be made u/s.14A of the Act. However, the AO observed that the Hon'ble Special Bench of the ITAT Delhi Tribunal in the case of Cheminvest Limited Vs. ITO [121 ITD 318] (Del)(SB) has held that disallowance u/s.14A can be made in the year in which no exempt income has been earned or received by the assessee . 3.3. As regards the disallowance u/s.36(1)(iii) of the Act, the AO, however, was not convinced with the submissions of assessee. He observed that the Hon'ble Supreme Court has admitted the Special Leave Appeal (Civil) 2012 (CC No.7138 to 7140/2012) on 30-04-2012 in the case of ACIT Vs. Tulip Star Hotels Ltd., wherein the interim order has been passed that the view in the case of SA Builders Ltd., (supra) needs re-consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more than the investments made by the assessee in its subsidiaries. He relied upon the decision of the Hon'ble Bombay High Court in the case of CIT Vs. Reliance Utilities Power Ltd., (2009) [178 135/313 ITR 340] (Bombay HC), wherein it was held that if the funds are available, both interest free and/or loans taken, just presumption would arise that investments would be out of interest free funds generated or available with company, provided such funds are sufficient to meet the investments . He submitted that the Hon'ble Supreme Court in the case of CIT Vs. Reliance Industries Ltd., (2019) [102 taxmann.com 52] (SC) has confirmed the view taken by the Hon'ble Bombay High Court by holding that the funds available to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowed the interest on the entire investment though according to the assessee, the cash credit account contains both interest free as well as interest bearing funds. As held by the Hon'ble Supreme Court where the interest free funds and interest bearing funds are mixed and the assessee makes investments in sister concern, it is to be presumed that such investments are out of interest free funds only and there cannot be any disallowance of interest on borrowed funds. Though the assessee has filed before us, the financial statements as on 31st March, 2010 to show that the interest free funds available with it at the time of investments, were much more than the investments made by the assessee, we are of the opinion that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion are concerned, it is submitted by the Ld.Counsel for the assessee that the tax effect in Revenue appeals for the AYs.2011-12 and 2013-14 is below the tax limit fixed by the CBDT vide Circular No.17 of 2019 dated 8th August, 2019. 13.1. Ld.DR also confirmed that the tax effect in these two appeals is less than ₹ 50 Lakhs and therefore for these reasons and as well as for the findings given by the CIT(A) in all these appeals of Revenue that the interest free funds available with the assessee were much more than the investments made by the assessee in subsidiary companies, we do not see any reason to remit the same to the file of the AO. Therefore, we dismiss the appeals of Revenue for the AYs.2011-12 and 2013-14. Appeal of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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