TaxTMI 
TaxTMI 
2014 (2) TMI 893
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....nistrative charges by the Assessing Officer u/s.14A of the Act. 3. The brief facts of the case are that the Assessing Officer observed that in Assessment Year 2004-05, the assessee has own funds available in the form of share capital and reserve and surplus of Rs 9929.16 lakhs and loan funds of Rs 12449.54 and the assessee has paid interest of Rs 1172.82 lakhs and that the assessee has made investment of Rs 27,48,000/-. He, therefore, made a proportionate disallowance of interest expenditure of Rs 1,45,457/-. Similarly, he observed that the assessee has incurred administrative expenses in the form of salary and wages of Rs 2042.32 lakhs and printing and stationery Rs 93.60 lakhs totaling to Rs 2135.92 lakhs, and therefore, he made a proportionate disallowance for administrative expenses of Rs 9416/-. Similarly, in the Assessment Year 2005- 06, the Assessing Officer observed that the assessee was having own funds in the form of share capital and reserve surplus of Rs 16573.64 lakhs and loan funds of Rs 13839.47 lakhs and that the assessee has paid interest of Rs 997.78 lakhs and has made investment of Rs 153.86 lakhs. He therefore, made proportionate disallowance of interest expe....
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....isallowance of interest expenditure in the years under consideration as the onus was on the assessee to show the nexus between the investments made by the assessee and the own funds of the assessee. 6. On the other hand, the Ld. AR of the assessee placed reliance on the decision of the Hon'ble Gujarat High Court in the case of CIT Vs. Suzlon Energy Limited (2013) 215 taxmann.com 272 (Guj.) wherein it was held that where the assessee had own interest free funds many times over the investment made in Indian subsidiaries and further there was no direct nexus between interest bearing borrowed funds and such investment, no disallowance of interest expenditure could be made u/s 14A of the Act. He further relied on the decision of Hon'ble Gujarat High Court in the case of CIT Vs. UTI Bank Limited (2013) 32 taxmann.com 370 (Guj.) wherein it was held that in the case where the assessee had sufficient interest free funds to meet his tax free investments yielding exempt income, it could be presumed that such investments were made from interest bearing funds and not loan funds and thus no disallowance u/s 14A was warranted. He also relied on the decision of the Hon'ble Gujarat High Court in....
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....on the assessee to prove that no interest bearing funds were utilized by the assessee in making the investments from which tax free income was earned by the assessee, and as the assessee failed to do so, the disallowance made by the AO was justified in view of the decision of the Hon'ble Calcutta High Court. We find that the decision of jurisdictional Gujarat High Court is to the effect that where the assessee has substantial interest free fund to meet his tax free investments yielding exempt income, it can be presumed that such investments were made from interest free funds and not loan funds. As the decision of the jurisdictional High Court is binding on the Tribunal, we respectfully following the decision of Hon'ble Gujarat High Court, confirm the order of the CIT(A) and dismiss the ground of appeal of the Revenue in both the assessment years under consideration. 8. In the Cross Objection, the assessee has raised ground against the confirmation of disallowance u/s.14A of Rs.9,460/- in Assessment Year 2004-05 and Rs.8,438/- in Assessment Year 2004-05 out of administrative expenses. At the time of hearing as these grounds involved very nominal amount no serious arguments were a....
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....nd therefore, the CIT(A) directed to restrict the disallowance of interest from the day of giving of advance to 21.03.2005 only. 12. Being aggrieved against this order, the Revenue is in appeal against the deletion of disallowance of interest expenditure of Rs 21,58,221/- in Assessment Year 2004-05 and Rs 7,33,624/- in the Assessment Year 2005-06 and the assessee is in the Cross-Objection against the sustenance of disallowance of Rs 17,29,660/- in Assessment Year 2004-05 and Rs 6,64,835/- in the Assessment Year 2005-06. 13. The Ld. AR of the assessee submitted that this is second round of appeal before the Tribunal. In the first round of appeal, the Tribunal vide order dated 22.10.2010 in ITAs No. 8/Ahd/08 and 9/Ahd/08 and COs No. 27/Ahd/08 and 28/Ahd/08 directed the Assessing Officer vide Para 7.2 at page 7 of the order to verify in view of the decision of the Hon'ble Bombay High Court in the case of Reliance Utilities Power Limited, 221 CTR 435 (Bom.) that if global position of the availability of funds shows that sufficient non-interest bearing funds are available with the assessee, then no disallowance of interest expenditure was to be made and also to examine in the ligh....
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....essment Officer exceeded his jurisdiction in again making proportionate disallowance of interest expenditure and interest expenditure in the years under consideration which is not in accordance with the direction given by the Tribunal vide its order dated 22.10.2010. We, therefore, delete the disallowance of interest expenditure sustained by the Ld. CIT(A) and thus dismiss the ground of appeal of the Revenue and allow the Cross-Objections of the assessee. 15. We have heard the rival submissions and perused the order of the lower authorities. This is the second round of appeal before this Tribunal. In the first round of appeal the Tribunal vide its order dated 22nd October, 2010 passed in ITA Nos. 8 and 9/Ahd/2008 and COs. 27 and 28/Ahd/2008 passed the following order: "7.2 It has been agreed by both the sides that the issue is squarely covered by the judgment of the Hon'ble Apex Court in the case of SA Builders, 288 ITR 1 (SC) wherein it has been held that if the interest free advance has a nexus with the business activity, ie. to establish commercial expediency then only no disallowance could be made. There is another latest decision of Reliance Utilities & Powe....