2012 (12) TMI 1209

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..... 14A towards interest expenses on the funds borrowed for business purpose but, diverted for non-business purpose of investments, without taking note of the landmark decision in the case of CIT(A) vs Abhishek Industries Ltd. 286 ITR 01 (P&H), wherein it is held that the onus was entirely on the assessee to prove that all the borrowed funds were used for the purpose of business, which the assessee failed to discharge during the course of assessment proceedings. 2. Facts in brief as emerged from the corresponding assessment order passed u/s.143(3) dated 31.1.2005 were that the assessee-company is in the business of investment in shares. The company was also lending money by placing inter-corporate deposits. Therefore, the assessee had shown in .....

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..... ompany. It was informed that the company had interest-free funds in the form of share capital and reserves and surplus of ₹ 3,12,97,169/-. It was also informed that the assessee had received interest-free advances from share holders of ₹ 4,44,94,000/-. Therefore, it was explained that total interest-free funds available with the assessee was at ₹ 7,57,91,169/-. Whereas, investment in equity shares was only at ₹ 6,32,71,135/-. In support of this contention, reliance was placed on the following case laws:- Sl.No(s) Decision in the case of … Reported in… 1. Maruti Udyog Ltd. vs. DCIT 92 ITD 119 2. ACIT vs. Eicher Ltd. 101 TTJ 369 (Del.)[ITAT] 3. CIT vs. Bombay Samachar Ltd. (1969) 74 ITR 723 (B .....

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..... company had itself disallowed interest amounting to ₹ 5,52,000/-. Thereafter, Learned CIT(Appeals) has quoted reliance on the decision of Hon'ble Bombay High Court in the case of CIT vs. Reliance Utilities & Power Ltd. (2009) 313 ITR 340 (Bom.). By placing reliance on the said case law, the disallowance u/s.14A was held as unjustified. Now the Revenue is before us. 5. We have heard both the sides. We have also perused the orders of authorities below as discussed hereinabove. We place on record a word of appreciation for the exhaustive exercise made by Learned CIT(Appeals) by examining the nexus of each investment. He has examined in depth the source of investment in shares so as to affirm the exact nexus of the investment whether .....

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