9911796707
TMI Blog2021 (11) TMI 1134X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Act, 1961 (the Act) was confirmed. This is the only issue in appeal. 2. Briefly stated the facts of the case are that assessee is a company engaged in power generation, distribution, trading, transmission and other ancillary and gifts. It filed its return of income for assessment 2010-11 declaring total income of Rs. 14,42,18,987/- on 11.10.2010. Subsequently the return was revised on 17.02.2012 at Rs. 14,34,37,237/-. 3. During the course of assessment proceedings assessee has shown a dividend income of Rs. 29,22,77,694/- and assessee has made disallowance under Section 14A of the Act of Rs. 5,87,643/-. Assessing Officer noted that the disallowance made by the assessee is not according to rule 8D. The assessee was questioned to furnis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is exempt from tax. It was further noted that assessee has also made certain investments in equity shares of its subsidiary companies. The AO noted that the cash flow by way of proceeds from issue of equity shares amounting to Rs. 1625 crores out of which substantial amount of Rs. 200 crores has been refunded to state bank of India for non-allotment of shares along with interest of Rs. 24,657,534/-. The quantum of money deployed for investment activity when compared to the activity other than investment is very high hence; the contention of the assessee that entire sale allotment money has been used for the purpose of the business is not maintainable. Thereafter he analyzed the HDFC bank account of the assessee and concluded that the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eved with the order of the learned CIT - A - preferred an appeal before us. 6. The learned authorised representative submitted that:- a. When interest free funds available with the assessee are much higher than the amount of investment made the presumption lies in favour of the assessee that the amount of investment made for earning of the exempt income is utilized out of interest free funds available. He referred to the paragraph number 5.1 of the order of the learned CIT - A wherein it is mentioned that the interest free owned funds available with the assessee was to the tune of Rs. 3920 crores whereas the total investment made was only Rs. 1343 crores. b. Only those investments are to be considered for the purpose of disallowance u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pport his contentions. f. He also referred to the various documents filed in the paper book submitted before us 7. Learned departmental representative vehemently supported the orders of the lower authorities. It was submitted that the learned assessing officer has correctly recorded the satisfaction about the disallowance offered by the assessee. It was further stated that as assessee has utilized the funds which are available with the assessee and HDFC bank for the investment in the mutual funds which yielded exempt income, the learned assessing officer has correctly disallowed a sum of Rs 2 46,57,534 as interest expenses directly attributable to the exempt income earned by the assessee. It was further stated that 0.5% of the average ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at investment from which exempt income has been actually earned during the year is only Rs. 605 crores. Furthermore, the investment made by the assessee is out of the mixed funds, as it did not maintain the books of account of the earning exempt income as well as taxable income separately. The honourable Supreme Court in case of Commissioner of income tax versus Reliance industries Ltd [2019] 102 taxmann.com 52 (SC)/[2019] 261 Taxman 165 (SC)has held as Under:- 7. Insofar as the first question is concerned, the issue raises a pure question of fact. The High Court has noted the finding of the Tribunal that the interest free funds available to the assessee were sufficient to meet its investment. Hence, it could be presumed that the investm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nil. The assessee has submitted the various accounts of such investments before us. In case if the opening balance and the closing balance of such investments from which exempt income is received during the year is rupees nil, naturally the average of such investment would also be Nil and therefore the consequent disallowance would also be Nil. In view of the above fact, we hold that there cannot be any disallowance under rule 8D (2) (iii) of the act is also Nil. Accordingly, we direct the learned assessing officer to delete the disallowance under rule 8D (2)(iii) of the act. Accordingly we direct the learned assessing officer to delete the disallowance under that sub rule amounting to Rs 1 71,87,853/-. 12. Accordingly we direct the l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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