TaxTMI 
TaxTMI 
2015 (7) TMI 775
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....Act are not applicable to the case of the appellant 3. In any case and without prejudice, the assessing authority and CIT(A) have erred in holding that both Rule 8D 2(iii) are applicable to the facts of the case. The rules and sub-rules are not applicable to the case of the appellant on the facts of the case. 4. In any case and without further prejudice the calculation as done and confirmed is totally erroneous 5. In view of the above and on other grounds to be adduced at the time of hearing, it is requested that the disallowance made and confirmed u/s 14A of the Act be deleted. 3. The assessee is an asset management company and provides venture capital assistance to various industrial sectors. The assistance is extended through venture capital equity funds managed by the assessee. The assessee filed its return of income on 30-12-2009 declared a total income of Rs. 199,31,03,010/-. The assessee received a sum of Rs. 32,54,491/- as allocation of dividend from various capital funds which was claimed as exempt u/s 10(34) of the Act. During the course of assessment proceedings the AO asked the assessee to furnish the working of disallowance u/s 14A of the Act. In response, the ....
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....was made about 6 years earlier. Thus, the learned AR submitted that there is no question of utilizing any borrowed funds. He has further pointed out that the assessee has produced the loan sanctioned letter before the AO as well as the CIT(A) to show that the loan was obtained from the banks for specific purpose as shown in the loan sanctioned letter. Therefore, the assessee has not utilized the loan other than the purpose of which the loan was taken. The CIT(A) has turndown the contention of the assessee on flimsy ground that the assessee has not produced a certificate from the bank that the loan was utilized by the assessee for the purpose for which the loan was taken. The learned AR has pointed out that if the AO or the CIT(A) was not satisfied with the evidence produced by the assessee than a further enquiry would have been made from the concerned bankers to verify the fact for the utilization of the loan. 5. The learned AR of the assessee submitted that though the AO has considered only the long term investments made for the purpose of 14A however, the assessee has also made the current investment and the source of funds has been explained by the assessee. In this respect the....
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....n 31- 03-2009 of current investments is increased from 17.00 Crores to 75.00 Crores. Thus, if the total investments comprising loan as well as current investments have taken into account there is a substantial increase during the year under consideration and therefore, the utilization of borrowed funds is not ruled out. 8. We have considered the rival submission and perused the material available on record. Section 14A stipulates apportionment of expenditure incurred for the composite/indivisible activity in which taxable and non-taxable income is received and the object of sec.14A is not to allow he assessee to reduce the tax payable on non-exempt income by debiting the expenditure incurred to earn the exempt income. If there is an expenditure directly or indirectly incurred in relation to exempt income the same cannot be claimed against the income which is taxable. Accordingly, the expenditure incurred in relation to the income which does not form part of total income has to be disallowed. In order to invoke sec.14A there should be proximate relationship between the expenditure and income which does not form part of the total income. In the case assessee claimed that no expendit....
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....the funds for the purpose of investments as the loan were taken for specific purpose as given in the loan sanctioned letters. The assessee contended that the loan was availed for the specific purpose and could be diverted for any other purpose. No doubt, that the claim of the assessee is always subjected to verification and examination and therefore, if the taxing authorities decline to accept the claim of the assessee than a proper examination and verification is required to be conducted to contradict the claim and evidence produced by the assessee. In the case in hand, the assessee produced the evidence in the shape of loan sanctioned letter of the banks to show that the loan was availed for specific purpose and therefore, it could not be utilized other than the purpose for which the loan was granted. The CIT(A) without making any further enquiry or investigation through the AO has refused to accept the claim of the assessee on the ground that the assessee has not produced the certificate from the bank that the loan were utilized for stated purposes. We do not agree with the view of the CIT(A) in this respect because, once the assessee has produced the details and loan sanctioned....