2011 (12) TMI 743

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....the A.O.   3.1. Facts of the case in brief are that the A.O. during the course of assessment proceedings noted that the assessee has earned exempt dividend income of Rs. 4,63,50,000/- on investments made.  He noted that the assessee has borrowed interest bearing funds and has invested in shares and securities. Therefore, he was of the opinion that the assessee satisfies all the conditions for disallowance of expenses attributable for earning of exempt income u/s 14A of the Act.  On being confronted by the A.O. it was submitted by the assessee that it has suo motu disallowed an amount of Rs. 47,99,527/- u/a 14A.  The assessee filed detailed break-up of amount borrowed and amount invested and tried to prove the nexus of....

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....urther disallowance u/s 14A read with rule 8D(2)(ii). 3.3 Based on the arguments advanced by the assessee and the various details furnished, the ld. CIT(A) noted that an amount of Rs. 300 crores taken from Reliance Capital Ltd. by the assessee on 29.1.2007 at 11% interest has been given to Swan Consultants P. Ltd. on the same day.  The interest paid at Rs. 5.61 crores to Reliance Capital Ltd. has been received from M/s Swan Consultants P. Ltd. Similarly, the assessee has received interest of Rs. 2,78,58,082/- on account of loan given to Swan Consultants (P) Ltd. and the assessee has paid interest of Rs. 2,78,58,082/- to reliance Capital Ltd. from whom the loan was taken. However, interest has been paid to Sonata Investments Pvt. Ltd....