TaxTMI 
TaxTMI 
2014 (7) TMI 753
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.... Tribunal, Ahmedabad [hereinafter referred to as "ITAT"] in ITA No. 685/Ahd./2008 for the assessment year 2004-05, the Revenue has preferred the present tax appeal to consider the following substantial question of law "Whether on the facts and in the circumstances of the case and in law, the Tribunal was correct in deleting the addition made on account of disallowance of interest expenditure of Rs. 16,02,493/-without appreciating that the assessee failed to establish that investments in mutual funds and interest free advances had been made out of own interest free funds by furnishing day-to-day cash-flow statement?" Tax Appeal No. 1059/2013 1.2 Feeling aggrieved and dissatisfied with the impugned judgment and ord....
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....f the case., the ITAT was right in restricting the addition made on account of disallowance of interest expenditure from Rs. 28,00,620/- to Rs. 64,909/- without appreciating that the assessee failed to establish that investments in mutual funds and interest free advances had been made out of own interest free funds by furnishing day-to-day cash-flow statement?" 2. For the sake of convenience the facts of Tax Appeal No.1058/2013 for the assessment year 2004-05 are considered which in nut-shell are as under: 2.1 That assessee engaged in the business of manufacturing of electrical laminations, job work of stamping filed return of income for the year under consideration declaring loss of Rs. 1,35,700/-. That the company took over the business....
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....lar disallowances were made by the AO with respect to the assessment years 2005-06 and 2006-07, which are deleted by the learned ITAT by impugned judgment and order. 2.5 The additional question of law in Tax Appeal No. 1060/2013 with respect to AY 2006-07 is deleting the disallowance of Rs. 13,89,062/-made under section 14A of the IT Act towards interest and other expenses incurred in relation to exempted income. 3. Heard Shri K.M. Parikh, learned Counsel appearing on behalf of the Revenue and Shri Manish J. Shah, learned Advocate appearing on behalf of the assessee, who is on caveat. 3.1 At the outset it is required to be noted that in each assessment year the AO directed to make disallowance under section 36(1)(iii) of the IT Act which....
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.... Hon. Bombay H.C. has held as under:- "Held that if there were funds available both interest-free and overdraft and/or loans taken, then a presumption would arise that investments would be out of the interest-free funds generated or available with the company, if the interest-free funds were sufficient to meet the investments". Considering the facts of the case and seen in the light of the decision of Hon. Bombay H.C. (supra) and respectfully following it, we are of the view that in the present case a presumption can be made that investment are out of interest free funds and, therefore, the Assessing Officer was not justified in making addition. We, therefore, direct the deletion of additi....
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....much less substantial question of law arise with respect to deletion of the disallowance made by the AO under section 36(1)(iii) of the IT Act. 4. Now, so far as the additional question raised in Tax Appeal No. 1060/2013 i.e. whether the ITAT was right in law in deleting the disallowance of Rs. 13,89,062/- made u/s.14A of the Act towards interest and other expenses incurred in relation to exempted income is concerned, it is required to be noted that as such learned CIT(A), after considering the factual position that the assessee had shown exempted income of Rs. 50,59,675/- comprising of long term capital gain of Rs. 13,50,412/- and dividend of Rs. 37,09,263/- and placing reliance on the decision of the Bombay High Court in the case of Reli....