2013 (12) TMI 407

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.....M. This appeal is preferred by the Revenue against the order of learned CIT(Appeals)-4, Mumbai dated 03-09-2010 whereby he deleted the disallowance of interest amounting to Rs.42,20,600/- made by the AO u/s 14A. 2. The assessee in the present case is a Company which is carrying on business as primary dealer in Government Securities and Money Market Operations. The return of income for the y....

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....on of borrowed funds for making the said investment. This stand of the assessee was not accepted by the AO. According to him, all its funds were kept by the assessee in one common pool and in the absence of separate cash flow statement maintained by the assessee, it was not possible for the assessee to establish that the investment in tax free bonds was made only out of its own funds. Since the bo....

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....nt time to make the investment in tax free bonds. It was also submitted that the assessee as per the RBI Regulation was prohibited from borrowings for any purpose other than its core business of trading in securities. It was contended that the interest bearing borrowed funds were utilized by the assessee entirely for the purpose of its business and the investment in tax free bonds having been made....

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....pool of all the funds maintained by the assessee, it was not possible for the assessee to substantiate its case that investment in tax free bonds was made out of its own funds. The learned CIT(Appeals), however, deleted the said disallowance after having found that the assessee at the relevant time had its own funds in the form of share capital and reserve amounting to Rs.703 crores which were far....