TaxTMI 
TaxTMI 
TaxTMI 
2015 (7) TMI 829
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....ntical, for the sake of convenience, we refer to the facts as involved in AY 2008- 09 being ITA No. 398/Hyd/2014. 4. Briefly the facts are, assessee a company is incorporated on 29/03/2007 under a scheme of demerger process of Aster Teleservices Pvt. Ltd. (ATPL). Assessee is basically engaged in the activity of constructing, executing, improving, developing and managing or controlling in India or elsewhere infrastructure projects of civil, mechanical including laying of optical fiber and copper cables related to information technology, telecommunications, hotels, warehouses, markets, factory buildings, residential and commercial complexes, bridges etc. It is also engaged in the business to acquire, purchase, lease, exchange, hire or otherw....
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....port of such contention, assessee also relied upon certain judicial precedents. 6. Ld. CIT(A) after considering the submissions of assessee in the context of the statutory provisions, observed that assessee is maintaining common account from where all its business transactions are routed including loans taken and investments made. She observed, there is nothing on record to show that investments made were out of its own funds and not from borrowed funds. She also observed that though assessee was requested to submit copy of the bank account reflecting loans taken and the dates of investments made, but, assessee did not furnish such information. Ld. CIT(A) referring to the decision of the Hon'ble Mumbai High Court in case of Godrej & Boyce ....
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....tted, as assessee was having a huge amount of surplus/own funds to take care of the tax exempt investments, it cannot be said that assessee has utilized borrowed funds for making investment. He submitted, unless a nexus is established between borrowed funds and investments, disallowance of interest expenditure cannot be made u/s 14A. Ld. AR submitted, the materials placed on record will clearly show that borrowed funds were utilized for the purpose for which they were sanctioned i.e., purchase of fixed assets and for working capital. Thus, it was submitted by ld. AR, since borrowed funds are not utilized for investment no disallowance out of interest expenditure can be made. In support of such contention, he relied upon the following decisi....
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....ng to the closing balance in the cash flow at the end of the year cannot claim that investments were made out of surplus funds. Thus, it was submitted, conditions of section 14A of the Act having been satisfied, disallowance made is in order. In support of his contention, ld. DR relied upon the following decisions: 1. Siva Industries & Holdings Ltd. Vs. ACIT, 54 SOT 49 (Chennai) 2. ACIT Vs. Champion Commercial Co. Ltd., 139 ITD 108 3. ITO Vs. RBK Sharebroking Pvt. Ltd., [2013] 54 ITCL 164 4. Dabur India Ltd. Vs. ACIT, [2013] 145 ITD 175 5. CIT Vs. State Bank of Travancore, 203 Taxman 639 6. Cheminvest Ltd. Vs. ITO, [2009] 121 ITD 318 9. We have considered the submissions of the parties and perused the orders of revenue authorities as....
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....strate that assessee was having sufficient surplus funds available with it to make investments. That being the case, a presumption cannot be made that assessee has utilized borrowed funds towards making investments. More so, when the secured loans were sanctioned by banks and financial institutions with conditions attached and material on record also show that assessee has utilized the same for the purpose for which they were obtained as there is substantial increase in the value of fixed assets, sundry debtors, etc. Therefore, unless a link/nexus is established between borrowed funds and the investments made, no disallowance u/s 14A can be made as far as interest expenditure is concerned. In the present case, when there is surplus fund ava....
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....re made to sister concerns, held that when the assessee has both interest bearing funds as well as non interest bearing surplus fund, presumption would be non-interest bearing surplus funds have been advanced to sister concerns, hence, no disallowance of interest expenditure can be made. Though, aforesaid decision of the Hon'ble Bombay High Court is in the context of disallowance of interest u/s 36(1)(iii) but the principle laid down will equally apply to disallowance made u/s 14A. 9.2 Therefore, when assessee was having enough non-interest bearing surplus fund to make the investment and department has failed to establish any nexus between the borrowed funds and investment, presumption would be that assessee has made investment utilizing i....