TaxTMI 
TaxTMI 
2016 (2) TMI 1290
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....es attributable to earning of the exempt income. 3. Facts in brief are that the assessee is a member of the National Stock Exchange of India ltd. and Bombay Stock Exchange Ltd., and is engaged in the business of share broking, trading in future options. The case of the assessee was selected for scrutiny and the AO framed assessment making disallowance u/s.14A of the Act on account of expenses attributable to earning of the exempt income. In appeal, the CIT(A) went with the view of Assessing Officer. Now, the assessee is in further appeal here before the Tribunal. 4. Ld. AR submitted before us that the assessee's own funds are sufficient to cover up the value of investments and hence no interest disallowance is required to be made u/s.....
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....tention of ld. AR before us was that the assessee's own funds are sufficient to cover up the value of investments and hence no interest disallowance is required to be made u/s 14A of the Act. The details of own funds and investments have been reproduced at Pg 6 of appellate order. From the table it is seen that the own funds as of 31.03.2010 are 3.5 times the Investments as on 31.03.2010 and are sufficient to cover the value of investments and hence no interest disallowance is required to be made u/s 14A of the Act in view of the decision of the Hon'ble Bombay High Court in the case of CIT v. Reliance Utilities (313 ITR 340). In the year under consideration also, as is evident from the chart reproduced in the order of CIT(A) at page....
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....evenue that the assessee has incurred any direct expenditure or any interest expenditure for earning the exempt income or keeping the investment in question. If there is expenditure directly or indirectly incurred in relation to exempt income the same cannot be claimed against the income which is taxable. For attracting the provisions of section 14A- "there should be proximate cause for disallowance which has relationship with the tax exempt income as held by the Hon'ble Supreme Court in case of CIT Vs. Walfort Share and Stock Brokers P. Ltd. ( 326 ITR 1). 7. The observation of the Tribunal in assessee's own case for assessment year 2008-09 & 2009-2010, order dated 7-5-2014, are as under :- "9.2 We have heard the Ld. AR as well ....
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....ivalent to the cost of investment in the shares. Further, there is no fresh investments during the year under consideration and all these investments were made in the earlier year; therefore, there is no question of utilization of the borrowed funds during the year under consideration. 5.1 It is pertinent to note that when the Assessing Officer had not made any disallowance u/s 14A on account of interest expenditure in the earlier year; therefore, in the absence of fresh investment during the year, no disallowance can be made on account of interest by applying provisions of sec. 14A. Further, the assessee earned the interest income of Rs. 42,17,981/ - as against the interest & brokerage expenditure of Rs. 30,79,450/-. This net inte....