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TMI Blog2016 (8) TMI 1610X X X X Extracts X X X X X X X X Extracts X X X X ..... t cannot be held that any disallowance u/s 14A can be made on the ground that share profit from the firm is exempt in the hands of the assessee. In the account of the firm there is a separate fixed capital account and current capital account. It needs to be examined, whether or not the borrowed funds which has been given to the current capital account and interest earned thereon has been offered as taxable income or not. If that is so, then no disallowance u/s 14A can be made. Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the impugned order passed by the Ld.CIT(A) on the following effective grounds:- "1. On the facts & circumstances of the case and in law, the Ld. CIT(A) erred in allowing interest paid to the extent of Rs. 21,18,279/- against interest earning of Rs. 1,68,85,213/- from Partnership Firm where assessee is a partner and the assessee has borrowed funds only with a motive to provide additional capital to partnership fund thereby maximizing his tax free profit from the firm. 2. On the facts & circumstances of the case and in law, the Ld. CIT(A) erred in deleting disallowance u/s 14A without appreciating the fact that applicability of sec. u/s 14A is upon the incidence of tax free income in the hands of the assessee, as in this case of tax fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest income. This fact has been noted by the AO at page 2 in para 4.2 of the assessment order. Once the amount borrowed is not towards capital contribution then, it cannot be held that any disallowance u/s 14A can be made on the ground that share profit from the firm is exempt in the hands of the assessee. In the account of the firm there is a separate fixed capital account and current capital account. The assessee's share in the partnership firm was 22% and capital standing to his credit as on 31.03.2010 was Rs. 6,66,00,000/- in the fixed capital and Rs. 19,00,34,158/- in the current account. The interest which has been received by the assessee is on current capital account against which the assessee has claimed deduction of the interest p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pugned order for the assessment year on the following effective grounds:- 1. On the facts & circumstances of the case and in law, the Ld. CIT(A) erred in allowing interest paid to the extent of Rs. 6,04,445/- against interest earning of Rs. 32,42,404/- from Partnership Firm where assessee is a partner and the assessee has borrowed funds only with a motive to provide additional capital to partnership fund thereby maximizing his tax free profit from the firm. 2. On the facts & circumstances of the case and in law, the Ld. CIT(A) erred in deleting disallowance u/s 14A without appreciating the fact that applicability of sec. u/s 14A is upon the incidence of tax free income in the hands of the assessee, as in this case of tax free profit fro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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