TaxTMI 
TaxTMI 
2019 (5) TMI 948
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.... taken up for disposal on merits. 3. The assessee has filed revised grounds. Ground nos. 1 to 3 are against confirmation of disallowance u/s.14A of the Incometax Act, 1961 (hereinafter also called 'the Act'). 4. Briefly stated, the facts of the case are that the assessee is engaged in the manufacturing of marine parts, reselling and exports. Exempt dividend income from mutual funds and shares was received during the year to the tune of Rs. 22,09,471/-. No disallowance u/s.14A was offered. On being called upon to explain the reasons for not offering any such disallowance, the assessee filed certain replies with which the Assessing Officer (AO) was not satisfied. Invoking the provisions of section 14A of the Act, he computed disallowance at....
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.... free surplus funds and such funds are utilised as interest free advances even for a non-business purpose, there cannot be any disallowance of interest paid on interest bearing loans. The Hon'ble Bombay High Court in CIT vs. Reliance Utilities and Power Ltd. (2009) 313 ITR 340 (Bom), has held that where an assessee possessed sufficient interest free funds of its own which were generated in the course of relevant financial year, apart from substantial shareholders' funds, presumption stands established that the investments in sister concerns were made by the assessee out of interest free funds and, therefore, no part of interest on borrowings can be disallowed on the basis that the investments were made out of interest bearing funds. In ....
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....y, the order of CIT(A) was upheld. When the matter came up before the Hon'ble High Court, it was contended by the Department that the shareholders' funds stood utilized in the purchase of fixed assets and hence could not be construed as available for investment in sister concern. Repelling this contention, the Hon'ble High Court observed that : "In our opinion, the very basis on which the Revenue had sought to contend or argue their case that the shareholders' fund to the tune of over Rs. 172 crore was utilized for the purpose of fixed assets in terms of the balance-sheet as on March 31, 1999, is fallacious." In upholding the order of the Tribunal, the Hon'ble High Court held that: "If there be interest free funds available to an assessee s....
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....owance of part of interest out of total interest paid by the assessee to the bank was not justified. 8. Applying the above proposition in the context of section 14A, the Hon'ble Karnataka High Court in CIT & Anr vs. Microlabs (2016) 383 ITR 490 (Kar) has held that when investments are made from common pool and non-interest bearing funds are more than the investment in tax free securities, no disallowance of interest expenditure u/s 14A can be made. This view has been taken by following the judgment of the Hon'ble Bombay High Court in CIT vs. HDFC Bank Ltd. (2014) 366 ITR 515 (Bom). It is further observed that this issue is no more res integra in view of the recent judgment delivered by the Hon'ble Supreme Court in Godrej & Boy....
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....oreign tour expenses amounting to Rs. 2,10,987/-. 12. The facts apropos this issue are that the AO made addition of Rs. 2,10,987/- on the ground that the assessee failed to produce any submission on the performance of foreign tour and how it was related to business. The ld. CIT(A) sustained the addition. The assessee is aggrieved by the confirmation of such disallowance. 13. I have heard both the sides and gone through the relevant material on record. A copy of the assessee's Profit and loss account has been placed at page 20 of the paper book. It can be seen that the assessee made export sales of Rs. 2.81 crore as against domestic sales amounting to Rs. 40.55 lakh. The ld. CIT(A) has recorded the assessee's submission made before him on....