TaxTMI 
TaxTMI 
2011 (10) TMI 662
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....ppeal of the Revenue and the Cross Objection of the assessee were heard together and are being disposed off by this consolidated order for the sake of convenience. 3. The ground of appeal raised by the Revenue is as under : "1. That the Ld. CIT(A)-II has erred in law and on facts in deleting the disallowance of Rs. 3,08,64,359/- out of interest and disallowance of Rs. 1,06,16,355/- out of indirect expenses which were held by the A.O., as expenditure incurred to earn income exempt from tax u/s 14A of I.T. Act." 4. The Assessing Officer during the course of assessment proceedings had invoked the provisions of section 14A of the Income Tax Act read with Rule 8D of the Income Tax Rules and computed the disallowance out of dividend inco....
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.... shares to the tune of Rs. 30.13 crores. Further, in the C.R.Division there is increase in investment to the tune of Rs. 0.50 crores. Thus there is net fall to the tune of Rs. 15.18 crores rather than increase in investments covered u/s 14A. In nutshell total increase in investments is as under : Increase in investments not covered u/s 14A Rs. 62.65 crores Fall in investments covered u/s 14A Rs.15.81 crores Rs.46.84 crores 6. The finding of the CIT (Appeals) in view thereof was that "there is no increase in investments covered under the provisions of section 14A". The CIT (Appeals) thus held as under : "On the contrary as explained in the written submission the assessee has earned inc....
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....he surplus funds were available with the company on the date of transaction. The CIT (Appeals) further observed that "The AO has not controverted the facts in the assessment order or in the proceedings before me. The Ld.AR reiterated his stand with reference to these statements placed in paper book that fresh investments in the year under appeal are also out of surplus funds. I have gone through these statements placed in the paper book and find force in his arguments". The CIT (Appeals) thus held as under : "15. As rightly contended by the Ld.Counsel from these details, it becomes quite clear that the total increase in investments is only due to reinvestment of huge income from these investments itself. Further there i....
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.... tune of Rs. 46.84 Crores (including the increase in investment at Rs. 62.15 Crores from where the income is taxable), again no disallowance u/s. 14A could be held to be justified." 8. The CIT (Appeals) also noted that similar addition was deleted by the Tribunal in assessee's own case relating to assessment year 2004-05 wherein it was held that no nexus was shown of the amount invested in investment from where the exempt dividend income had been earned with the interest bearing borrowings. The CIT (Appeals) also considered that the assessee had suo motu disallowed a sum of Rs. 1.52 crores being the expenditure incurred directly attributable to the exempt income. The CIT (Appeals) thus held that in view of the ratio laid down....
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....rce of investments made in the year out of surplus funds in the bank. The A.O. has not controverted these facts. ii) Brought forward investments amounting to Rs. 226.73 Crores has been held out of own sources as per appellate orders of the earlier years. iii) Interest expense incurred by the other units of the company other than main unit is only in relation of manufacturing activities. It is only the main unit is holding almost all the units. In support of this unit-wise balance sheets have been placed in the paper book before me. Further, letter from the State Bank of India lead bank regarding renewal of working capital limit dated 11.4.2005 also filed in support of contention that separate limits have been s....
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....on merits therefore also deleted. Thus grounds 1, 2(a) & (b) stands allowed in favour of the appellant." 10. The learned D.R. for the Revenue had not controverted the findings of the CIT (Appeals) and in the absence of the same we find no merit in the ground of appeal raised by the Revenue. 11. The only ground of appeal raised by the assessee in Cross Objection is as under : "That the Ld.CIT(A)-II has erred in confirming the disallowance of Rs. 2,00,000/- towards Administrative Expenses on estimate basis ignoring the facts that assessee has already disallowed a sum of Rs. 1,52,06,451/- on account of expenses incurred in relation to exempt income." 12. We find that the Hon'ble Bombay High Court in Godrej & Boyce Mfg.Co.....