2011 (7) TMI 1316

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....00/- in the form of equity and advancement of loans to subsidiary companies. On these investments and advances no income had been earned during the year. It was further noticed that the balance sheet of the Assessee had interest bearing funds to the tune of Rs. 19,20,67,163/- and the Assessee company had debited interest and finance charges to the tune of Rs. 1,35,36,298/-. On being asked to explain the allowability of interest expenditure by the AO, the Assessee stated that the advances and investments were made in subsidiary and associate companies over the years and in the year 1999 the Assessee had raised Rs. 10 crores by fresh issue of capital specially to fund the subsidiary projects. It was further submitted that investments and loans were given/made in subsidiaries for the purpose of business, therefore, interest cost is not be disallowed and it should fully be allowed as business expenses. After considering the submissions of the Assessee, the AO was of the view that the submissions of the Assessee is general in nature and against the facts available on record as no prudent business man will park such huge funds without earning any income thereon. After relying on few case....

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....and not Rs. 52.13 as taken by AO. Still aggrieved, the Assessee is in appeal before the Tribunal. 6. After hearing the learned DR and perusing the relevant material on record as well as going through the orders of the authorities below, we find that Assessee before the CIT(A) submitted that it had own funds of Rs. 126.83 crores and investment made in equities and loans given to subsidiaries were only Rs. 108.75 crores. He further submitted that its own fund far exceeds the investment made and loans given to subsidiary companies. In this connection, the Assessee filed certificates of Chartered Accountants to prove that all borrowed funds were used for the business of the Assessee. Further, the Assessee relied on the decisions of the CIT(A) in the assessment year 2004-05 & 2005-06 to claim that similar additions made by the AO in those years were not upheld by the CIT(A). In this connection, we refer to the judgment of the Hon'ble jurisdictional High Court in the case of Reliance Utilities and Power Ltd. [2009] 313 ITR 340 (Bom.) held that "if there were funds available both interest-free and overdraft and/or loans taken, then a presumption would arise that investments would b....

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....ee to place all germane material on the record. The proceedings for assessment year 2002-03 would stand remanded to the AO. The AO should determine as to whether the Assessee had incurred any expenditure (direct or indirect) in relation to dividend income/income from mutual funds which does not form part of the total income as contemplated under Section 14A. The AO can adopt a reasonable basis for effecting the apportionment. While making that determination, the AO should provide a reasonable opportunity to the Assessee of producing its accounts and relevant or germane material having a bearing on the facts and circumstances of the case. 10. In view of the ratio laid down by the Hon'ble jurisdictional High court in the case of Godrej & Boyce Mfg. Co. Ltd. (supra), we remit the matter back to the file of the AO with a direction decide the issue afresh in the light of the said judgment of the Hon'ble Jurisdictional High court after providing reasonable opportunity of being heard to the Assessee. 11. In the result, appeal of the Assessee is treated as allowed for statistical purposes. ITA No. 2726/M/10 - appeal by the revenue 12. The ground raised by the revenue is....

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....spaper from the particular place in the world. The Appellant has undertaken foreign travel to cover important event in the world. This is evident from the published articles cannot be said to be not incurred wholly and exclusively for business purposes at least in the specific business of the Appellant. The fact should also not be ignored that the coverage of the events had helped the Appellant to maintain the circulation during the year under consideration. Thus, I do not find any cogent reason for which the impugned addition should be sustained in absence of any defect in the books of account to attract the provisions of Section 145 of the Act. There are clinching evidences to substantiate the claim of the Assessee. In accordance with the above discussion, the foreign traveling expenses are found to have been incurred wholly and exclusively for the purpose of business and are allowable. Accordingly, the impugned addition is deleted in the facts and circumstances of the instance case. The appeal succeeds on this ground. 15. Aggrieved by the order of CIT(A), the revenue is in appeal before the Tribunal. 16. We have heard the learned DR, perused the material on record and gone....