2016 (7) TMI 1037

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....n short "the Act". 2. It is evident from a combined perusal of Revenue's grounds pleaded in the instant appeals that it seeks to raise two identical substantive issues. The first one seeks to restore section 14A disallowance of Rs. 16,63,952/- and Rs. 27,35,608/- made by the Assessing Officer in corresponding assessment orders and deleted in the lower appellate proceedings. Second substantive issue sought to be raised in the instant appeals is for revival of interest disallowance u/s. 36(1)(iii) of Rs. 13,40,273/- and Rs. 17,73,192/-; respectively. 3. We come to the former issue first. The assessee company is a builder/developer. It is also a trader in fabric and garments. There is no dispute that it does not have any exempt income in....

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....f Rs. 9,08,71,341 as Reserves and Surplus and of Rs. 62,03,38,566 as Booking Advance from members as on 31-3-2007. It was explained by the learned ARs that no interest was paid on the advances received from the members. Thus, in AY 2007-08 more interest free funds were available. 2 In AY 2008-09 and AY 2009-10 no investments have been made for earning tax free income. In the return of AY 2008-09 the appellant has not shown any tax free income like dividend income or any other income. In the return of AY 2009-10 tax free income of just Rs. 2,64,318 has been shown as dividend received from Mutual Fund investment for which it was informed that investment was made during the year and same was also sold off during the year. It was also explai....

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.... Pvt. Ltd. ITA Nos. 299 and 486/2014 decided on 05-09-2014 holds that the impugned section 14A disallowance does not apply in absence of exempt income since the same is to be made in relation to the latter one. We are of the view that the impugned disallowance is not sustainable on this score alone. It further emanates that the assessee has not made any investment for earning its exempt income in the two impugned assessment years. This is followed by the crucial appellate finding that it had sufficient reserves and surpluses in the corresponding assessment year of investments exceeding the latter sums. The hon'ble jurisdictional high court in CIT vs. Torrent Power Ltd. (2014) 44 taxmann. com 441 negates applicability of section 14A disallow....

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....est under Section 36(1)(iii) of the Act is uncalled for. Reliance was placed upon the decision of Madhav Prasad Jatia v/s CIT 118 ITR 200 . Attention of this office was drawn by the appellant towards following findings of the assessing officer: "After considering the replies filed and the arguments put forward during the hearing it is seen that most of the loans and advances were given wholly and exclusively for the purpose of business. The available interest free fund with the assessee were in exceeds of the investment yielding tax free income and thus were used in making the advances." It was argued that as the appellant has sufficient Interest free funds to cover both Investments yielding tax free income and Advances given at lower....