2013 (1) TMI 809

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....estion of law for our consideration:- "Whether on the facts and circumstances of the case, the Hon'ble Tribunal was justified in deleting addition made on account of disallowance of Rs. 6,62,50,000/- u/s. 14A of the Act?" 2. We have heard learned counsel Mr. S.M. Mehta for the respondent. Facts lie in a narrow compass thus:- 2.1 The assessee respondent is a the State Government owned company and is acting as development financial institution for assisting medium and large scale industries in the State of Gujarat. Scrutiny assessment was made of the return submitted by the assessee for the Assessment Year 2004-05 of the assessee where it had determined total loss of Rs. 12,99,16,560/-. The Assessing Officer made the addition o....

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....the submissions as also the entire gamut of facts, this Tax Appeal is not being entertained for the reasons to follow hereinafter:- 4.1 At the outset, it is needed to be mentioned that Section 14A was incorporated in relation to the income not includible in total income. The assessee obtained unsecured Government loans of huge amount of Rs. 384.95 crores and paid interest to the tune of Rs. 6.62 crores(rounded off). It also invested in different kinds of equity shares, a large amount to the tune of Rs. 295.78 crores (rounded off) and as per the provision of Section 10(34), the prospective dividend income received from such investment is exempted from tax. This was perceived to be a diversion of business fund as the investment in equity s....

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....e available without any interest liability with the assessee and with no evidence to indicate that the borrowed money was utilized for the purpose of advancement of the sister concerns, the assessee was held eligible for allowance of the interest. 6. Reference is needed here to the judgment of the Delhi High Court in the case of Commissioner of Income-Tax vs. Kribhco reported in [2012] 349 ITR 618 (Delhi), wherein also similar question was answered in favour of the assessee and against the Revenue. 7. In view of the discussion made hereinabove, it is to be stated that it is expected of the Department to establish a nexus between the interest bearing funds borrowed and those invested by the assessee respondent. Only when it is shown th....