TaxTMI 
TaxTMI 
2016 (6) TMI 737
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....47,190/- being dividend income was claimed as exempt under section 10(34) of the Act. The assessee had also claimed an amount of Rs. 14,294/- being interest expenditure. A suo-moto disallowance under section 14A of the Act, amounting to Rs. 50,000/- was made by assessee as was confirmed by the CIT (Appeals) in assessee's own case for assessment year 2005-06. The Assessing Officer invoking the provisions of Rule 8D of the Income Tax Rules, computed the disallowance at Rs. 8,42,519/- and after giving relief of the suo-moto disallowance of Rs. 50,000/- made an addition of Rs. 7,92,519/-. 4. Before the CIT (Appeals), submissions were made manifold. It was stated that the assessee had not invsted any amount on purchase or sale of shares/mutual funds during the year. These were old investments, that too in group concerns only. No borrowing were made to invest as during the year share capital of the assessee was Rs. 1.74 crores and reserves and surplus were Rs. 61.42 crores, making the owned funds to the extent of Rs. 63.16 crores. The position of investments held by the assessee company in different years was explained. The main argument of the assessee was that in the presence of....
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....to disallowance made by the assessee is not correct in view of the judgment of the Hon'ble Jurisdictional Punjab & Haryana High Court in the case of CIT Vs. Deepak Mittal (2014) 361 ITR 131 (P&H), the disallowance in this regard is not tenable. The learned D.R. in his written submissions has stated that at para 4.11 of his order the Assessing Officer has recorded such satisfaction, however, on perusal of the same, we do not find any such satisfaction having been recorded. 8. Now, we would like to deal with the detailed written submissions filed by the learned D.R., which seem to be made very arduously. It has been stated at the outset that the undisputed facts of the case are that it is a case of 'mixed funds' and borrowed funds as well as own funds have been used for making investments, income from which are exempt. The reliance placed by the learned counsel for the assessee on the decision of the I.T.A.T., Chandigarh Bench in the case of Hero Cycles Ltd. (supra) was vehemently objected to. Reliance was placed by the I.T.A.T. on the judgment of Punjab & Haryana High Court in the case of Bright Enterprises Pvt. Ltd., in ITA No.624 of 2013 (O&M), dated 24.7.2015. Cert....
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.... the argument of the Revenue that shareholders funds to the tune of over Rs. 172 crores were utilized for the purposes of fixed assets in term of the Balance Sheet. 11. In para 8, the judgment of Punjab & Haryana High Court in the case of Hero Cycles Ltd. (supra), was analysed and is stated that in that case also the Tribunal had held that interest was set off against the income from interest and the investment in share and funds were out of dividend proceeds. In this finding of fact, disallowance under section 14A of the Act was held not to be tenable by the I.T.A.T. The Hon'ble High Court in a very clear terms had held that whether any expenditure was incurred, in a given situation, is a pure question of fact. 12. In view of all this, the Hon'ble High Court held that no substantial question of law arisen out of the order of the I.T.A.T. (in the case of Avon Cycles Ltd.). From the reading of the said finding of fact given by the I.T.A.T., as reproduced in para 5 of the judgment, we see that in view of the fact that as per the working of the assessee itself, the interest expenditure for earning exempt income is to the tune of Rs. 10,49,851/-, the Assessing Officer was....
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....above, the Assessing Officer is directed to delete the addition made under section 14A of the Act. The ground No.1 raised by the assessee is allowed in favour of the assessee. 16. The learned counsel for the assessee preferred not to press ground Nos.2 and 3, therefore, the same are dismissed as not pressed. 17. The ground No.4 is general in nature and, hence needs no adjudication. 18. The ground No.5 raised by the assessee reads as under : "5. That the learned CIT(A) has erred in capitalizing interest of Rs. 1,14,096/- towards machinery under installation account and Rs. 7,55,888/- towards building under construction ignoring the facts that he he appellant had already capitalized the interest in the respective heads and no further disallowance was called for and even otherwise the investment was out of own income of the year." 19. Briefly, the facts are tht the assessee had shown in its Balance Sheet an amount of Rs. 3,08,22,637/- and Rs. 1,06,16,141/- being machinery under installation and building under construction. The Assessing Officer noted that the assessee had taken secured loan of Rs. 23,11,33,892/- on which interest expenditure of Rs. 2,75,14,294/-/-....
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....icer. However, rejecting the contention of the assessee, the CIT (Appeals) confirmed the disallowance made by the Assessing Officer. He was of the view that the Assessing Officer had clearly brought out in the assessment order that the assessee has received secured loans amounting to Rs. 23,11,892/- on which it has paid interest. The claim of the assessee that it had not borrowed any money for addition to plant & machinery is mere self-serving. As regards building under construction, he stated that as per Explanation-8 to section 43(1), the interest is to be capitalized till the date the asset is put to use. The assessee itself has admitted that these flats were not used during the year, therefore, the Assessing Officer was justified in capitalizing the interest pertaining to these flats. 22. Aggrieved by this, the assessee has come up in appeal before us. The learned counsel for the asseeess reiterated the submissions made before the lower authorities, while the learned D.R. relied on the order of the CIT(Appeals). 23. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. ....