KHAMBATTA FAMILY TRUST,AHMEDABAD vs. THE DY. CIT, CIRCLE-5(2),, AHMEDABAD

आदेश/O R D E R

PER RAJPAL YADAV, JUDICIAL MEMBER:

2. The assessee has taken five grounds of appeal. However, its grievance revolves around a single issue viz. the ld.CIT(A) has erred in upholding addition of Rs.3,06,737/- which was added by 2 the AO under section 14A of the Income Tax Act 14A r.w. Rule 8D of the Income Tax Rules.

3. Brief facts of the case are that the assessee is an AOP engaged in the business of manufacturing of soft drink and fruit grain drink mix etc. under the brand name “Rasna”. It has filed its return of income on 29.9.2013 declaring total income at Rs.3,19,10,958/-. The case of the assessee was selected for scrutiny assessment and notice under section 143(2) was issued and served upon the assessee. On scrutiny of the accounts, according to the AO, the assessee has shown dividend income of Rs.2,46,246/- which was claimed as exempt. The ld.AO thereafter invited explanation of the assessee to show the expenses which were relatable to earning of exempt income, and how those expenditure have been added back by the assessee while filing the return. The assessee has filed written submissions which has been reproduced by the AO, and thereafter he disallowed a sum of Rs.13,88,959/-. The discussion made by the AO reads as under: “5.3 I have duly considered the above reply of the assessee. The main emphasis of the assessee is on the fact that he has invested surplus fund and no borrowed fund was utilized for the investment. Here it will be better to refer to the balance sheet of the assessee which shows that the assessee has total funds of Rs.6,48,82,007/- as on 31.03.2013 which is its own capital. Further, total investment as on 31.03.2013 has been shown at Rs.8,01,09,664/- against an amount of Rs.4,25,85,391 /-. The two figures i.e. the funds available with the assessee and the investment made themselves speaks volumes about the availability of surplus funds with the assessee as the amount of investment made for earning exempt income itself exceeds the amount of total fund available with the assessee by an amount of Rs. 1,52,27,657/-, In light of this fact, the case laws relied upon by the assessee do not in any manner help him. Apart from 3 above, the assessee has also paid interest amounting to Rs. 13,88,023/- during the year under consideration. Further- more, from the details submitted by the assessee it is found that fresh investment of Rs. 3,75,24,273/- has been made by the assessee during the. year under consideration itself. The volume of the above investment also indicate that certain administrative expenses must have been involved therein. In light of these facts, the reply of the assessee cannot be accepted. Disallowance of expenses attributable to exempt income has been considered in view of followingcase laws: