TaxTMI 
TaxTMI 
2019 (2) TMI 695
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.... made the disallowance of Rs. 2,89,72,984/- in respect of expenditure incurred for earning of tax exempt income.. 4. However, in appeal, the Ld. CIT(A) noted that the assessee was possessed of sufficient own funds / interest free funds to meet the investments whereupon the tax exempt dividend income was earned. He, relied upon the decision of the Jurisdictional High Court in the own case of the assessee titled as 'CIT Vs. Kapsons Associates' (2016) 381 ITR 204 (P&H), wherein, it has been held that if the assessee has availability of own sufficient funds to make the investment, then the presumption would be that investment has been made from own funds and no disallowance u/s 14A of the Act would be attracted under those circumstances. He, therefore, deleted the addition in respect of the disallowance of interest made by the Assessing officer under rule 8D(2)(ii) of the Act. However, so far as the disallowance on administrative expenses under rule 8D(2)(iii) was concerned, the Ld. CIT(A) sustained the addition so made by the Assessing officer. Being aggrieved by the above order of the CIT(A), the Revenue thus has come in appeal before us. 5. We have heard the rival contentio....
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....ng mixed funds, therefore, the interest paid by the assessee is also an interest on the investments made. Such being a finding of fact, we do not find that any substantial question of law arises for consideration of this Court. After going through the records and applying the principle of apportionment, which is held to be applicable in such cases, we do not find any merit in Civil Appeal No. 1423 of 2015, which is accordingly dismissed." 6. We find that the aforesaid decision of the Hon'ble Supreme Court in the case of 'Avon Cycles Ltd Vs. CIT' (supra) with the lead case being 'Maxoppp Investment Ltd Vs. CIT' (supra) has come into consideration before the Coordinate Bench of the Tribunal in the case of 'ACIT Vs. Janak Global Resources Pvt Ltd' ITA No. 470/Chd/2018 order dated 16.10.2018 (incidentally consisted of both of us), wherein, the issue has been decided in favour of the assessee also considering the decision of the Hon'ble Apex Court in the case of 'Hero Cycles Vs. CIT' 379 ITR 347 (SC) . The relevant part of the order of this Tribunal in the case of 'ACIT Vs. M/s Janak Global Resources Pvt Ltd.' (supra) is reproduced as under:- "9. We have car....
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....es its colour from the questions involved in the case in which it is rendered." In the case of CIT vs Sun Engineering Works Pvt. Ltd. 198 ITR 297(SC), the Hon'ble Supreme Court observed that Judgements must be read as a whole and observations in judgements should be considered in the context in which they are made and in the light of the question that were before the court: "It is neither desirable nor permissible to pick out a word or a sentence from the judgement of the Supreme Court divorced from the context of the question under consideration and treat it to be the complete law declared by the court. The judgement must be read as a whole and the observation from the judgement have to be considered in the light of the questions which were before the court.A decision of the Supreme Court takes its colour from the question involved in the case in which it is rendered and while applying the decision to a later case,courts must carefully try to ascertain the true principle laid down by the decision." 11. The Hon'ble apex court in the case of Goodyear India Ltd & Ors vs State of Haryana & Another and State of Maharashtra & Another reported in 188 ITR 402(19....
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....en dealt with and which is reproduced again hereunder: 40. Civil Appeal No. 1423 of 2015 is filed by M/s. Avon Cycles Limited, Ludhiana, wherein the AO had invoked section 14A of the Act read with Rule 8D of the Rules and apportioned the expenditure. The CIT(A) had set aside the disallowance, which view was upturned by the ITAT in the following words: "...Admittedly the assessee had paid total interest of Rs. 2.92 crores out of which interest paid on term loan raised for specific purpose totals to Rs. 1.70 crores and balance interest paid by the assessee is Rs. 1.21 crores. The funds utilized by the assessee being mixed funds and in view of the provisions of Rule 8D(2)(ii) of the Income Tax Rules the disallowance is confirmed at Rs. 10,49,851/-, we find no merit in the ad hoc disallowance made by the CIT (Appeals) Rs. 5,00,000/-. Consequently, ground of appeal raised by the Revenue is partly allowed and ground raised by the assessee in cross-objection is allowed..." Taking note of the aforesaid finding of fact, the High Court has dismissed the appeal of the assessee observing as under: "In the present case, after examining the balance-sheet of th....
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....of fact that the assessee had sufficient credit balance in its bank account for making the impugned advances and had sufficient own interest free funds, the assessee company could in any case utilize those funds for giving advances to its Directors. The findings of the Hon'ble Apex Court at para 16 of this order to this effect are as under: "16. Insofar as the loans to directors are concerned, it could not be disputed by the Revenue that the assessee had a credit balance in the bank account when the said advance of Rs. 34 lakhs was given. Remarkably, as observed by the CIT(A) in his order, the company had reserve/surplus to the tune of almost Rs. 15 crores and, therefore, the assessee company could in any case, utilise those funds for giving advance to its directors." 14. It is evident from the above that the Hon'ble Apex Court had in very clear terms held that where sufficient own interest free funds are available with the assessee, the presumption arises that the assessee had utilised those funds for the purpose of making interest free non business advances. Thus in very clear terms the Hon'ble Apex Court in the case of Hero Cycles Pvt. Ltd. (supra) ....