2016 (1) TMI 1080

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....ng, nobody represented the assessee in spite of issuance of registered notice to the assessee, therefore, I have no option but to proceed ex-parte qua the assessee and tend to dispose of the appeal on the basis of material available on record. The ld. DR, Shri A.K. Dhondial defended the conclusion arrived at in the impugned order. 2.1. I have considered the rival submissions and perused the material available on record. In the ground raised in this appeal, the assessee has stated that the ld. First Appellate Authority did not appreciate that no borrowed funds were used for making the investment and the total dividend income earned was Rs. 57,975/-, therefore, no disallowance u/s 14A could have been made to the tune of Rs. 2,31,140/-, whi....

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....is reproduced hereunder:- "5. The finding of fact recorded by the Income Tax Appellate Tribunal is that the investments in equity shares and m utual funds were made by the assessee during the assessment yea rs 1994 and it has been consistently held by the Income Tax Appe llate Tribunal that these investments have been made out of the a ssessee's own funds and not out of the borrowed funds. Even the investments made in the assessment year 1999-2000 have been held by the Income Tax Appellate tribunal to be out of assessee's own funds and not out of borrowed funds by its order dated 24th June 2011. Save and except contending that Section 14A was not on the statute book when the Income Tax Appellate Tribunal passed ord ers in ....

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....s engaged in manufacturing of cycles and parts of two-wheelers in multiple units. It earned dividend income, which is exempted under Section 10 (34) and (35). The Assessing Officer made an inquiry whether any expenditure was incurred for earning this income and as a result of the said inquiry addition was made by way of disallowance under Section 14A (3), which was partly upheld by the CIT (A). The Tribunal held that there was no nexus with the expenditure incurred and the income generated. The finding recorded are as under:- "We have perused the same and find that the plea of the assessee that the entire investments have been made out of the dividend proceeds, sale proceeds, debenture redemption etc., is borne out of record. In fa....

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....isallowance under Section 14A, unless there is evidence to show that such interest bearing funds have been invested in the investments which have generated the 'tax exempt dividend income.' As noted earlier, there is no nexus established by the Revenue in this regard and therefore, on a mere presumption, the provisions of Section 14A cannot be applied. Thus, we find that the CIT (Appeals) erred in part sustaining the addition. In fact, in the absence of such nexus, the entire addition made was required to be deleted. We accordingly hold so." 3. We have heard learned counsel for the revenue. 4. Learned counsel for the appellant relies upon Section 14A (2) and Rule 8D (1) (b) to submit that even where the assessee cl....

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....s. M/s Winsome Textile Industries Limited, Chandigarh), decided on 25.8.2009, wherein it was observed as under:- "6. Contention raised on behalf of the revenue is that even if the assessee had made investment in shares out of its own funds, the assessee had taken loans on which interest was paid and all the money available with the assessee was in common kitty, as held by this Court in CIT v. Abhishek Industries Limited, (2006) 286 ITR 1 and therefore, disallowance under section 14A was justified. 7. We do not find any merit in this submission. Judgment of this Court in Abhishek Industries (supra) was on the issue of allowability of interest paid on loans given to sister concerns, without interest. It was held that deducti....