2009 (11) TMI 33

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..... le when loan was taken for business purpose and not for diverting the same to sister concern without having nexus with the business - In the present case, admittedly, the assessee did not make any claim for exemption. In such a situation, Section 14A could have no application - 331 of 2009 (O&M) - - - Dated:- 4-11-2009 - CORAM:- HON 'BLE MR. JUST ICE A DAR SH KUMAR GOEL HON 'BLE MR. JUST ICE GURDEV SINGH Present: Mr. Rajesh Sethi, Advocate, for the revenue. ORDER 1. The revenue has preferred this appeal under Section 260A of Income Tax Act, 1961 (for short, "the Act") for the assessment year 2004-05 against the order of Income Tax Appellate Tribunal, Chandigarh Bench 'B', passed in ITA No. 247/Chandi/2008 on 4 .....

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..... the expenditure by way of interest incurred by it, thus obviating the application of Section 14A of the Act. Even with regard to the funds of the main unit, Ludhiana the funds flow position explained shows that only the non-interest bearing funds have been utilized for making the investments. At pages 3 to 6 of the paper book are placed the details of the Bank accounts, wherein the amount of dividend, sale proceeds of shares, debenture redemption etc. have been received and later on invested in the investments in question. Such funds are ostensibly without any burden of interest expenditure. Thus, on facts we do not find any evidence to show that the assessee has incurred interest expenditure in relation to earning to the tax exempt incom .....

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..... are unable to accept the submission. 4. In view of finding reproduced above, it is clear that the expenditure on interest was set off against the income from interest and the investment in the share and funds were out of the dividend proceeds. In view of this finding of fact, disallowance under Section 14A was not sustainable. Whether, in a given situation, any expenditure was incurred which was to be disallowed, is a question of fact. The contention of the revenue that directly or indirectly some expenditure is always incurred which must be disallowed under Section 14A and the impact of expenditure so incurred cannot be allowed to be set off against the business income which may nullify the mandate of Section 14A, cannot be accepted. Dis .....

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