TaxTMI 
TaxTMI 
2016 (2) TMI 618
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd disallowed a sum of Rs. 13,67,830/- being proportionate interest that can be attributed to investment income which is exempt. The AO had also disallowed Rs. 83,958/- being 0.5% of such investments towards administrative expenses under Rule 8D(2)(iii). This issue has not been agitated before us. 4. On appeal, the CIT(Appeals) examined the balance sheet as on 31.12.2009 and 31.12.2010 and non-interest bearing funds and interest bearing funds, the details of which are as follows:- Particulars 31/03/2010 31/03/2009 Share Capital 21,00,00,000 21,00,00,000 Reserve & Surplus 8,35,22,431 5,05,81,295 29,35,22,431 26,05,81,295 Total 29,35,22,431 26,05,81,295 Loan funds Secured 66,83,96,760 78,39,92,045 Unsecured 7,30,71,985 4,38,72,305 Total 74,14,68,745 82,78,64,350 5. From the above details, the CIT(A) observed that the assessee was having sufficient interest free fund whereas investment appearing in the balance sheet as on 31.3.2009 was at Rs. 3,05,85,628 and as on 31.3.2010 at Rs. 29,97,589 and in view of the same, there were no new investments made during the pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t income". This proportion or portion of the exempt income surely cannot swallow the entire amount. 10. The Punjab & Haryana High Court in the case of CIT v. Winsome Textile Industries Ltd. [2009] (319 ITR 204 ) and the Gujarat high Court in the case of CIT v Corrtech Energy P. Ltd (372 ITR 97) have held that when the assessee did not make any claim for exemption of any income from payment of tax, no disallowance could be made under section 14A of the Income-tax Act, 1961. The conjoint reading of these decisions would show that (i) the disallowance u/s 14A read with Rule 8D should be made only with respect to Investments which have yielded tax exempt income during the relevant previous year which is excluded from computation of Total income in the Assessment. 11. The First Appellate Authority has found as a fact that the Assessee had sufficient funds for making the Investment in shares. There is no details as to the shares which had yielded exempt income for applying the provisions of sec 14A. However the CIT(A) has found as a fact that the Assessee had sufficient funds to make the entire investments. There was no new investment made during the year and hence there is no ques....
X X X X Extracts X X X X
X X X X Extracts X X X X
....receive 26% of built up area as consideration for the land transferred. But as per the supplementary agreement dt. 1.11.2007, 26% of the built up area is retained by the assessee company and BSSL retained Rs. 7.5 crores which was given to it as security deposit. 17. From the above, the AO noticed that Rs. 7.50 crores is retained by BSSL and in lieu of this, the assessee company retained 26% of the built up area in Phase-I. But for the supplementary agreement, the assessee company would have received back Rs. 7.50 crores which is shown as advance in its books of account, thus the company has parked its huge sum of Rs. 7.50 crores with its sister concern, on which no interest is being charged. The AO held that the said transaction is in the nature of accommodation entry and brought to tax the interest on such advance. 18. On appeal, the CIT(Appeals) observed from -the balance sheet that advance given to others as on 31/03/2009 at Rs. 9.76 crores and as on 31/03/2010 at Rs. 9.78 crores, the break-up of which was given by the assessee as under:- 19. From the details given above, the CIT(A) observed that Rs. 7.50 crores was advance given to M/s Bhoruka Steel & Services Limited,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Hence no part of interest payable on borrowings can be disallowed on grounds of interest free advance of Rs. 7.5 Crores to BSSL. The revenue's appeal on this issue is dismissed. 23. In the result, the Revenue's appeal is dismissed. CO No.144/B/2015 24. The CO is filed by the assessee on the ground that the CIT(A) erred in holding that a sum of Rs. 10,49,952 is to be disallowed despite the fact that the assessee had not claimed the above sum as expenditure. 25. The assessee before us submitted that out of the total interest paid during the year, a sum of Rs. 1,00,49,952/- was capitalized to building no.2 and the balance sum of Rs. 8,92,01,800 was debited to profit and loss account. It was submitted before the CIT(A) that the entire sum of Rs. 8.92 crores is in respect of building which are already completed and therefore. allowable as deduction. The CIT(A) accepted the contention of the assessee, but he held that a sum of Rs. 1,00,49,952/- is required to be disallowed as it had not been reduced from the sum of Rs. 9,14,61,789/- being the gross interest paid. 26. The assessee submitted before us that during the year it had paid the following amounts towards the interes....