2014 (7) TMI 1113

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....0. 2.1 The only issue arising in the instant appeal is with regard to the disallowance u/s.14A, having been confirmed; rather, enhanced in certain respects, by the ld. CIT(A), so that the assessee is in second appeal. 2.2 We may, to begin with, capsule the status of the disallowance as it has transverse upto the present stage: -  The assessee's objections 3. The assessee's objections, as made out before us, furnishing synopsis of the balance-sheets as at the year-ending 31st March, 2007 to 2009 and the corresponding fund flow, i.e., for financial years (f.ys.) 2007-08 & 2008-09 (Annexure A), drawn with reference thereto, was along the following lines: a) the interest expenditure incurred and claimed is, apart from unsecu....

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....responding with the final accounts as on the record of the Department. 4.2 We shall, accordingly, answer the issues arising before us in terms of the broad principles, issuing statement where consider necessary and relevant for being followed/adopted: a) the fund flow statements, stating the course of the fund flow for the relevant years, would need to be examined to identify and determine the avenue of the various sources of funds, giving the initial financial position as on 31.03.2007; b) the interest paid is to be identified in terms of the :-   investments in loans yielding interest (at Rs. 1.57 lacs and Rs. 7.67 lacs respectively for the two successive years in appeal);   investment in non-interest bearing loan....

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....y. CIT [2010] 328 ITR 81 (Bom), which deals with this aspect of the matter in considerable detail (refer para 85, 86 at pgs. 135-136), would have to be borne in mind, particularly with regard to the fund position as obtaining as at the beginning of the year. Further, as explained by the Tribunal in the case of Dy. CIT vs. Damani Estates and Finance P. Ltd. [2013] 25 ITR (Trib) 683 (Mum.) and per the Third Member decision in D. H. Securities Pvt. Ltd. v. Dy. CIT [2014] 146 ITD 1 (Mum), the interest on investment in shares held as stock-in-trade, in-as-much as it yields both tax-free (dividend) and taxable income (share trading profit), is to be disallowed u/s.14A at the rate of twenty per cent. (20%) of such interest. d) the assessee shal....