TaxTMI 
TaxTMI 
2015 (11) TMI 1704
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....f income for the AY 2010-11 declaring a total income of Rs. 4,12,01,740. The Assessing Officer passed an assessment order u/s. 143(3) of the Income-tax Act, 1961 ["the Act"] determining the taxable income at Rs. 19,87,60,915 by making the following additions:- a) Interest on loan Rs. 4,53,40,320 b) Disallowance u/s. 14A r.w. Rule 8D Rs. 1,54,63,081 c) Bad debts disallowed Rs. 4,52,73,321 3. Aggrieved by the order of the Assessing Officer, the assessee preferred appeal before the CIT(Appeals). 4. In the submissions before the CIT(Appeals), the assessee relied on the decision of the Hon'ble Delhi High Court in the case of CIT v. Tin Box Co. (260 ITR 637) and CIT v. Hotel Savera (239 ITR 795, 796). 5. The brief facts are that the AO n....
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....e made for non-business purposes is without any factual basis as the amount of Rs. 21.80 lakhs was placed as security/collateral with the lenders for the purpose of borrowing and letter from OBC has been filed in this regard. The CIT(A) observed that it was pointed out by the assessee that the fixed deposits to this extent are not in the nature of any discretionary investment but have been made to adhere to the conditions of the sanction of the loans by the banks and the various institutions. Further an amount of Rs. 7 Crores was placed in short term deposits towards the end of the financial year. 7. The CIT(Appeals) stated that the investments, fixed deposits and mutual funds have only resulted in earning of interest of Rs. 2,66,17,276 an....
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....ara 4.2 of the assessment order it has been stated that proportionate interest expenditure of Rs. 9,68,22,773/- in the computation of total income only an amount of Rs. 4,53,40,320/- has been disallowed and added back. This amount therefore stands deleted. As regards the investment in mutual fund disallowance if any is required to be made u/s. 14A, as the specific provisions in relation to exempt income is required to be invoked." 9. Aggrieved, the department is in appeal before us and raised ground No.2 which is as under:- "2. On the facts and in the circumstances of the case the learned CIT(A) erred in law in directing the AO to not make any disallowance of interest on loans without appreciating the fact that the assessee company diver....
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....aw of Income-ax,9th edition, at page 2349, observed as under: "For the same reason a presumption appears to be permissible that where the assessee has his own capital as also the borrowed funds, the former rather than latter to have been utilised for the non-business or personal expenses." 13. The ld. DR relied on the order of the Assessing Officer. 14. We have heard both the parties. In the case of CIT v. Reliance Utilities and Power Ltd. [2009] 313 ITR 340 (Bom), it has been held as follows:- "16. If there be interest-free funds available to an assessee sufficient to meet its investments and at the same time the assessee had raised a loan it can be presumed that the investments were from the interest-free funds available. In our opi....
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....rest-free fund generated or available with the company, if the interest-free funds were sufficient to meet the investments. In this case this presumption is established considering the finding of fact both by the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal." 15. Respectfully following the ration of the above decision, ground No.2 of the department is dismissed. 16. The second issue is with respect to disallowance of bad debts of Rs. 4,52,73,321. 17. The facts are that the AO in the assessment order has stated that the assessee has only submitted a list of bad debts and not provided any evidence that it is allowable. According to the AO, the conditions of subsection (2) of section 36 have not been fulfilled.....