ACIT, CHENNAI V. Carburettors Ltd., CHENNAI

ITA 209/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6215 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 23-01-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R SIVARAMAN
• Assessee Lawyers: SREENIVAS JCIT
• Keywords: Business income; Earning of tax free income; Cost of acquisition; Commercial expediency
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI ... , , # BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ I.T.A. NO. 209/MDS/2017 / ASSESSMENT YEARS : 2012-13 ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE -1(2), CHENNAI 600 034. VS. M/S. CARBURETTORS LTD., RAHEJA TOWERS, 7 TH FLOOR, SIGMA WING NO. 177, ANNA SALAI, CHENNAI 600 002. [PAN: AAACC 1299E] ( / APPELLANT) ( / RESPONDENT) %& / APPELLANT BY : SHRI. R. SIVARAMAN, ADVOCATE )*%& / RESPONDENT BY : SHRI. SREENIVAS, JCIT & /DATE OF HEARING : 06.06.2017 & /DATE OF PRONOUNCEMENT : 05.09.2017 /O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE REVENUE FILED THIS APPEAL AGAINST THE ORDER O F THE COMMISSIONER OF INCOME TAX (APPEALS)-1, CHENNAI IN ITA NO. 46/CIT(A)- 1/2015-16 DATED 01.11.2016 :-2-: I.T.A. N0. 209/MDS/2017 2. M/S. CARBURETTORS LTD., IS ENGAGED IN THE BUSINE SS OF PROMOTING COMPANIES. IN THE ASSESSMENT MADE FOR THE ASSESSME NT YEAR 2012-13, THE AO FOUND THAT OUT OF THE BORROWED UNSECURED LOAN OF RS. 35 CRORES FROM CENTRAL BANK OF INDIA , THE ASSESSEE INVESTED RS. 23,01,44,989/- IN THE EQUITY SHARES OF M/S. UCAL FUEL SYSTEMS LTD., A SISTER CON CERN AND FURTHER ADVANCED RS. 4,98,55,767/- AS LOAN TO THE SAME CONCERN. THI S YEAR, THE COMPANY HAS RECEIVED INTEREST OF RS. 57,59,356/- TOWARDS THE L OAN ADVANCED TO ITS SISTER CONCERN & OTHERS AND A DIVIDEND OF INCOME RS. 4,32, 80,356/-. AGAINST THEM, IT HAS CLAIMED INTEREST EXPENDITURE OF RS. 69,27,1 34/-. THE AO FOUND THAT IN THE EARLIER YEAR, THE ASSESSEE COMPANY TREATED THIS RS. 24 CRORES AS A LOAN AND OFFERED INTEREST INCOME ON IT. HOWEVER, LATER ON, THE LOAN WAS CONVERTED INTO EQUITY SHARES OF RS. 23,01,44,989/- AS ON THE YEAR ENDING 31.03.2010. ON SUCH FACT, HE HELD THAT THE ASSESSEES ACTION IS NOTHING BUT DIVERSION OF LOAN INTO EQUITY AND HENCE THE INCOME RECEIVED BY T HE ASSESSEE IN THE EARLIER YEAR AS INTEREST HAS BEEN SHIFTED FROM TAXABLE ITEM (I.E., INTEREST) TO NON- TAXABLE ITEM (I.E., DIVIDEND). SINCE, THE ASSESSEE DID NOT HAVE ANY BUSINESS LINK WITH ITS SISTER CONCERN, RELYING UPON THE DECI SION OF THE KERALA HIGH COURT IN THE CASE OF SMT. LEENA RAMACHANDRAN VS. CIT, THR ISUR (2011) (10 TAXMAN.COM 2009), THE AO REJECTED THE CLAIM THAT TH E INVESTMENT IN SISTER CONCERN IS FOR COMMERCIAL EXPEDIENCY AND DISALLOWED THE EXPENSES RELATING TO EARNING EXEMPTED INCOME U/S. 14A. THE AO WAS OF TH E VIEW THAT ON THE DIVIDEND INCOME ARISING ON SUCH INVESTMENTS, DISALL OWANCE HAS TO BE MADE IN :-3-: I.T.A. N0. 209/MDS/2017 CONSONANCE WITH THE PROVISIONS OF U/S. 14A R.W.R. 8 D. THE AO, THEN PROCEEDED TO WORK OUT THE INTEREST EXPENDITURE INCU RRED DIRECTLY IN RELATION TO THE INVESTMENT AT RS. 45,54,986/- AND QUANTIFIED TH E PROPORTIONATE DISALLOWANCE AT RS. 11,51,481/- UNDER RULE 8D(II) A ND THUS, DISALLOWED AT RS. 57,06,467/-. AGGRIEVED, THE ASSESEE FILED AN APPEA L BEFORE THE CIT(A). THE CIT(A), INTER ALIA, HELD THAT THE APPELLANT PLEADE D THAT THE ENTIRE FUNDS INVESTED IN THE SISTER CONCERN WAS OF BUSINESS PRUD ENCE AND NOT WITH THE OBJECTIVE OF EARNING DIVIDEND. RELIANCE WAS PLACED ON BUTTERSS ITS CASE IN THIS REGARD. THE CASE LAWS RELIED UPON INCLUDED THOSE O F M/S. S.A. BUILDERS VS. CIT (SC) IN CIVIL APPEAL NO. 5811 OF 2006 ETC. AS ON 3 1.03.2012 THE APPELLANT HELD 1,08,20,089 EQUITY SHARES OF RS. 10 EACH OF M/ S. UCAL WITH AN ACQUISITION COST OF RS. 2301.45 LAKHS AND 7,850 EQU ITY SHARES OF RS. 10 EACH OF M/S. BHARATH TECHNOLOGIES AUTO COMPONENTS LTD (B TACL) WITH AN ACQUISITION COST OF RS. 1,51 LAKHS. BOTH UCAL AND BTACL ARE GROUP COMPANIES OF THE APPELLANT. THE APPELLANT BEING TH E PROMOTER AND SINGLE LARGER SHAREHOLDER OF UCAL A LISTED COMPANY. THE D ISALLOWANCE U/S. 14A R.W. RULE 8D WAS SPECIALLY CONTESTED PLACING RELIANCE ON THE CASE LAWS OF THE JURISDICTIONAL ITAT IN THE CASE OF EIH HOTELS LTD V S. DCIT, ITA NO. 1503 & 1624/MDS/2012 DATED 17.07.2013 (CHENNAI TRIBUNAL), DCIT VS. M/S. AMALGAMATIONS LTD IN ITA NO. 811 & 1712/MDS/2015 OR DER DATED 16.09.2015 AND 29.09.2015, CHEMINVEST LTD VS. CIT 378 ITR 33 O RDER DATED 02.09.2015 IN ITA NO. 749/2014 DECIDED BY THE HONBLE DELHI HI GH COURT AND :-4-: I.T.A. N0. 209/MDS/2017 JURISDICTIONAL TRIBUNAL ACIT VS. M. BASKARAN IN ITA NO. 171/MDS/2013 ORDER DATED 31 ST OF JULY, 2014. IN EIH HOTELS (SUPRA) IT WAS HELD BY THE ITAT THAT WHERE INVESTMENTS WERE MADE BY THE ASSESSE IN THE S UBSIDIARY COMPANY THE SAME ARE NOT TO EARN CAPITAL GAINS OR DIVIDEND INCO ME. THEY WERE MADE TO PROMOTE THE SUBSIDIARY COMPANY. THE ASSESSE NOT BE ING IN THE BUSINESS OF INVESTMENT, SUCH INVESTMENTS WERE MADE ON ACCOUNT O F BUSINESS EXPEDIENCE. THE DIVIDEND EARNED BY THE ASSESSE FROM INVESTMENT IN SUBSIDIARY COMPANY IS PURELY INCIDENTAL. THEREFORE THE INVESTMENT MADE B Y THE ASSESSE IN ITS SUBSIDIARY ARE NOT TO BE RECKONED FOR DISALLOWANCES U/S. 14A R.W. RULE 8D. IN DCIT VS. AMALGAMATIONS LTD (SUPRA) IT WAS HELD SIMI LARLY RELIANCE BEING PLACED IN THE RATIO IN EIH ASSOCIATED HOTELS VS. CIT. IN ACIT VS. M. BASKARAN (SUPRA) THE FACTS RELATED TO THE ASSESSE WHICH HAD NOT RECE IVED ANY EXEMPT INCOME. THE ITAT HELD THEREIN THAT DISALLOWANCE U/S. 14A CO ULD NOT BE SUSTAINED IN SUCH CIRCUMSTANCES. IN CHEMINVEST LTD VS. CIT (SUP RA) THE HONBLE DELHI HIGH COURT HELD THAT DISALLOWANCE U/S. 14A ENVISAGES THA T THERE SHOULD BE AN ACTUAL RECEIPT OF INCOME WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME, DURING THE RELEVANT PREVIOUS YEAR FOR THE PURPOSE OF DISALLOWI NG ANY EXPENDITURE INCURRED IN RELATION TO THE SAID INCOME. IN OTHER WORDS, S. 14A WILL NOT APPLY IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR (PARA 23). THE INVESTMENTS ADMITTEDLY OUT OF BORRO WED FUNDS WERE FOR STRATEGIC INVESTMENTS IN SUBSIDIARYCOMPANY I.E., UC AL. THEREFORE, THE INTEREST ATTRIBUTABLE TO THE BORROWING HAS TO KEPT OUT WHILE WORKING OUT THE :-5-: I.T.A. N0. 209/MDS/2017 DISALLOWANCE UNDER RULE 8D. SIMILARLY, AS THE APPE LLANT HAS NOT EARNED ANY INCOME FROM DIVIDEND FROM ITS INVESTMENTS MADE IN B TACL DURING THE YEAR, NO DISALLOWANCE CAN BE COMPUTED UNDER RULE 8D. RESPEC TFULLY FOLLOWING THE RATIOS ABOVE, IT IS HELD THAT THE DISALLOWANCE U/S. 14A R.W. RULE 8D MADE BY THE AO CANNOT BE UPHELD. THE AO IS DIRECTED TO DEL ETE THE ADDITION. AGGRIEVED AGAINST THIS ORDER, THE REVENUE FILED THI S APPEAL, INTER ALIA, WITH THE FOLLOWING GROUNDS: 2. THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT DIS ALLOWANCE U/S.14A WILL NOT APPLY IF NO EXEMPT INCOME IS RECEI VED OR RECEIVABLE DURING THE YEAR. 2.1 THE LEARNED CIT(A) ERRED IN DELETING THE DISALL OWANCE EFFECTED U/S.14A WITHOUT APPRECIATING THE FACT THAT THE ASSE SSEE HAD INVESTMENTS IN SHARES AND MUTUAL FUNDS, CAPABLE OF EARNING EXEM PT INCOME, THEREBY ATTRACTING THE PROVISIONS OF SEC.14A READ WITH RULE 80 2.2 THE CIT(A) FAILED TO APPRECIATE THAT SUB SECTIO N (1) OF SEC.14A CLEARLY STATES THAT NO DEDUCTION SHALL BE MADE IN R ESPECT OF EXPENDITURE INCURRED IN RELATION TO THE INCOME WHICH DOES NOT F ORM PART OF TOTAL INCOME UNDER THE ACT. 2.3 THE CIT(A) FAILED TO APPRECIATE THAT THERE WAS NO COMMERCIAL EXPEDIENCY INVOLVED AND THE ASSESSEE HAD UTILIZED T HE BORROWED FUNDS FOR INVESTING IN THE EQUITY SHARES OF ITS SISTER CO NCERNS WITH A VIEW TO EARNING OF DIVIDENDS. THEREFORE, THE DISALLOWANCE B Y THE A.O. OF THE CLAIM OF INTEREST EXPENDITURE ON EARNING OF THE EXE MPT INCOME WAS REQUIRED TO BE UPHELD. 2.2 THE LEARNED CIT(A) FAILED TO APPRECIATE THE FAC T THAT EVEN IN THE ABSENCE OF EXEMPT INCOME, IF EXEMPT INCOME BEAR ING INVESTMENTS ARE AVAILABLE IN A PARTICULAR YEAR, THE PROVISIONS OF SEC.14A READ WITH RULE 80 SHALL HAVE APPLICABILITY AND THE ASSESSING OFFICER IS BOUND TO DISALLOW THE EXPENDITURE THUS WORKED OUT. :-6-: I.T.A. N0. 209/MDS/2017 2.3 THE CIT(A) FAILED TO APPRECIATE THAT THE HON'BL E BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE HAS HELD THAT T HE PROVISIONS OF SUB SECTIONS (2) AND (3) OF SECTION 14A OF THE INCOME T AX ACT 1961 ARE CONSTITUTIONALLY VALID AND THAT THE PROVISIONS OF R ULE 80 OF THE INCOME TAX RULES AS INSERTED BY THE INCOME TAX (FIFTH AMEN DMENT) RULES 2008 ARE NOT ULTRA VIRES THE PROVISIONS OF SECTION 14A, MORE PARTICULARLY SUB SECTION (2) AND DO NOT OFFEND ARTICLE 14 OF THE CON STITUTION; 3. WE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES. THE ASSESSEE IS PROMOTING COMPA NIES AND IT HAS NO OTHER ACTIVITY OTHER THAN BORROWING LOANS AND INVESTING T HEM IN ITS SISTER CONCERN AND LENDING TO THEM. ITS INCOME COMPRISES OF INTER EST AND DIVIDEND ONLY. AS POINTED OUT BY THE ASSESSING OFFICER, THE ASSESSEE HAS BORROWED INTEREST BEARING MONEY, ORIGINALLY LENT IT ON INTEREST AND A DMITTED SUCH INTEREST INCOME. BUT, SUBSEQUENTLY IT CHANGED PART OF ITS L OAN AS EQUITY SHARES, THEREBY THE CORRESPONDING INTEREST INCOME WAS NOT A DMITTED, ALTHOUGH, IT HAS ADMITTED DIVIDEND INCOME ON THE INVESTMENTS. THE A SSESSING OFFICER HAS HELD THAT SINCE THE ASSESSEE HAS MADE INVESTMENTS IN EQU ITY SHARES, IN RELATION TO WHICH INTEREST EXPENSE IS INCURRED, IT IS TO BE DIS ALLOWED, AS THE SAME IS INCURRED FOR THE PURPOSE OF EARNING EXEMPTED INCOME . FURTHER, THE ASSESSEE HAS NOT PRODUCED EVIDENCES IN SUPPORT OF ITS CLAIM, ON THE NATURE OF BUSINESS INCOME THAT WOULD BE REALIZED OUT OF CONTROLLING IN TEREST. FURTHER, 'CONTROLLING INTEREST' IS NOT AN ASSET AS CONSIDERED BY THE SUPR EME COURT IN THE CASE OF VODAFONE INDIA LTD. THEREFORE, THE CLAIM OF THE ASS ESSEE CANNOT BE ACCEPTED. :-7-: I.T.A. N0. 209/MDS/2017 HE FURTHER HELD THAT THE ASSESSEE COMPANY DO NOT HA VE ANY BUSINESS LINK WITH ITS SISTER CONCERN. HENCE, RELYING UPON THE DECISIO N OF THE KERALA HIGH COURT WHICH DISTINGUISHED THE APEX COURT DECISION IN THE CASE OF S.A. BUILDERS LTD. VS. CIT 288 ITR 1 (SC), HE REJECTED THE ASSESSEE'S CLAIM THAT THE INVESTMENT IN SISTER CONCERN IS FOR COMMERCIAL EXPEDIENCY. ON THE OTHER HAND, THE CIT(A) HAS ALLOWED THE APPEAL ON THE RATIOS OF EIH HOTELS LTD VS. DCIT, ITA NO. 1503 & 1624/MDS/2012 DATED 17.07.2013 (CHENNAI TRIBUNAL) , CHEMINVEST LTD VS. CIT 378 ITR 33 ORDER DATED 02.09.2015 IN ITA NO. 74 9/2014 DECIDED BY THE HONBLE DELHI HIGH COURT AND THE JURISDICTIONAL TRI BUNAL DECISION IN ACIT VS. M. BASKARAN IN ITA NO. 171/MDS/2013 ORDER DATED 31 ST OF JULY, 2014. WE HAVE GONE THROUGH THE ABOVE ORDERS. THE FIRST DISTINGUI SHABLE FACT IS THAT THE ASSESSEE HAS RECEIVED DIVIDEND INCOME DURING THIS A SSESSMENT YEAR, WHILE IN THE CASES REFERRED BY THE CIT(A), NONE OF THEM RECE IVED DIVIDEND DURING THE YEAR UNDER DISPUTE. IN THE CASE OF EIT HOTELS LTD. , THAT ASSESSEE WAS NOT INTO THE BUSINESS OF INVESTMENTS AND IT HAS MADE OUT A C ASE THAT IT HAD INVESTED OUT OF ITS OWN FUNDS (NON-INTEREST BEARING FUNDS) A ND SUCH INVESTMENTS WERE MADE IN ITS SUBSIDIARIES WHICH WERE IN THE LINE OF BUSINESS OF THAT ASSESSEE. IN THE ASSESSEES CASE, IT IS AN INVESTMENT COMPANY . IT HAS INVESTED ITS MONEY OUT OF BORROWED FUNDS ON WHICH IT IS CLAIMING INTEREST. IT HAS NOT ESTABLISHED, THAT BUT FOR RECEIPT OF INTEREST AND D IVIDEND FROM THE COMPANIES IN WHICH IT INVESTED/LENT ITS MONEY, WHAT OTHER BEN EFITS IT GOT. THUS, THIS CASE DOES NOT FALL WITHIN THE SCOPE OF RATIOS RELIED ON BY THE CIT(A). :-8-: I.T.A. N0. 209/MDS/2017 THE RELEVANT PORTION OF THE KERALA HIGH COURTS DEC ISION REPORTED IN 399 ITR 296 (KERALA) IN THE CASE OF CIT VS. SMT. LEENARAMAC HANDRAN IS EXTRACTED AS UNDER: ON FACTS WE FIND THAT THE INTEREST PAID BY THE ASS ESSEE DURING THE PREVIOUS YEAR FOR THE FUNDS BORROWED FOR ACQUISITIO N OF SHARES IN THE COMPANY WAS AT THE RATE OF 24% P.A. AND THE TOTAL I NTEREST PAID IN THE ACCOUNTING YEAR ALONE IS AS MUCH AS RS.17,44,310/-. IT IS ON RECORD THAT ASSESSEE HAD RECEIVED ONLY A DIVIDEND INCOME OF RS. 3 LAKHS AND NO OTHER BENEFIT IS DERIVED FROM THE COMPANY FOR THE BUSINES S CARRIED ON BY IT. THE DISALLOWANCE PROHIBITED UNDER SECTION 14A IS EX PENDITURE INCURRED FOR EARNING ANY INCOME WHICH DOES NOT CONSTITUTE TO TAL INCOME OF THE ASSESSEE. IN OTHER WORDS, ANY EXPENDITURE INCURRED FOR EARNING ANY INCOME WHICH IS NOT TAXABLE UNDER THE ACT, IS NOT A N ALLOWABLE EXPENDITURE. DIVIDEND INCOME IS EXEMPT UNDER SECTIO N 10(33) OF THE INCOME TAX ACT AND SO MUCH SO, DIVIDEND EARNED BY T HE ASSESSEE ON THE SHARES ACQUIRED BY HER WITH BORROWED FUNDS DOES NOT CONSTITUTE TOTAL INCOME IN THE HANDS OF THE ASSESSEE. SO MUCH SO, IN OUR VIEW, DISALLOWANCE WAS RIGHTLY MADE BY THE ASSESSING OFFI CER. IN FACT, THE TRIBUNAL ITSELF HAS ESTIMATED DISALLOWANCE OF RS.2 LAKHS BY APPLYING SECTION 14A. WE DO NOT KNOW HOW THE TRIBUNAL CAN RE STRICT THE DISALLOWANCE TO RS.2 LAKHS AND ALLOW BALANCE ABOVE RS.15 LAKHS WHEN THE WHOLE BORROWED FUNDS WERE UTILISED BY THE ASSES SEE FOR PURCHASE OF SHARES IN THE COMPANY. IN OUR VIEW, THE REASONING G IVEN BY THE TRIBUNAL FOR DISALLOWANCE OF RS.2 LAKHS I.E. BY APPLYING SEC TION 14A, SQUARELY APPLIES FOR THE INTEREST PAID ON BORROWED FUNDS BEC AUSE IT IS ON RECORD THAT THE ENTIRE FUNDS BORROWED WERE UTILISED FOR AC QUISITION OF SHARES BY THE ASSESSEE IN THE COMPANY. IN FACT, IN OUR VIEW, ASSESSEE WOULD BE ENTITLED TO DEDUCTION OF INTEREST UNDER SECTION 36( 1)(III) OF THE ACT ON BORROWED FUNDS UTILISED FOR THE ACQUISITION OF SHAR ES ONLY IF SHARES ARE HELD AS STOCK IN TRADE WHICH ARISES ONLY IF THE ASS ESSEE IS ENGAGED IN TRADING IN SHARES. SO FAR AS ACQUISITION OF SHARES IS IN THE FORM OF :-9-: I.T.A. N0. 209/MDS/2017 INVESTMENT AND THE ONLY BENEFIT ASSESSEE DERIVED IS DIVIDEND INCOME WHICH IS NOT ASSESSABLE UNDER THE ACT, THE DISALLOW ANCE UNDER SECTION 14A IS SQUARELY ATTRACTED AND THE ASSESSING OFFICER , IN OUR VIEW, RIGHTLY DISALLOWED THE CLAIM. AS ALREADY POINTED OUT, THE C ALCUTTA HIGH COURT DECISION WHICH PERTAINS TO THE PERIOD PRIOR TO INTR ODUCTION OF SECTION 14A, HAS NO APPLICATION. THE DECISION OF THE SUPREME COU RT ALSO DOES NOT APPLY BECAUSE IN THIS CASE APART FROM INVESTMENT IN SHARES OF THE COMPANY, THERE IS NOTHING TO INDICATE THAT THE ASSE SSEE'S BUSINESS WAS FULLY LINKED WITH THE BUSINESS OF THE LEASING COMPA NY OR THAT ASSESSEE'S BUSINESS IS SOLELY DEPENDENT ON THE BUSINESS OF THE LEASING COMPANY. IN FACT, THE WHOLE TRANSACTION WAS A TOTAL FIASCO IN A S MUCH AS, AS AGAINST RS.17,44,310/- PAID TOWARDS INTEREST ON BORROWED FU NDS SERVICED AT THE RATE OF INTEREST OF 24% P.A., THE DIVIDEND INCOME R ECEIVED BY THE ASSESSEE DURING THE PREVIOUS YEAR WAS A MEAGRE SUM OF RS.3 LAKHS. THIS ONLY SHOWS THAT THE BUSINESS CARRIED ON BY THE LEAS ING COMPANY WAS NOT VERY SUBSTANTIAL TO JUSTIFY THE ASSESSEE'S INVESTME NT THROUGH BORROWED FUNDS. THEREFORE, IN OUR VIEW, THE PRINCIPLE OF COM MERCIAL EXPEDIENCY GONE INTO BY THE SUPREME COURT DOES NOT APPLY TO TH E FACTS OF THIS CASE. THEREFORE, WE HOLD THAT THE TRIBUNAL IN PRINCIPLE R IGHTLY HELD THAT THE UTILISATION OF BORROWED FUNDS FOR ACQUISITION OF SH ARES WILL NOT ENTITLE THE ASSESSEE FOR CLAIMING DEDUCTION OF INTEREST PAID ON SUCH BORROWED FUNDS. HOWEVER, WE HOLD THAT THE TRIBUNAL WAS NOT JUSTIFIE D IN ALLOWING THE CLAIM IN EXCESS OF RS.2 LAKHS. FOR THE SAME REASONI NG APPLIED BY THE TRIBUNAL, THE ASSESSEE IS NOT ENTITLED TO DEDUCTION OF ANY AMOUNT TOWARDS INTEREST PAID ON FUNDS BORROWED BY WAY OF F IXED DEPOSITS TAKEN FOR ACQUISITION OF SHARES IN THE COMPANY, WHICH HEL PED THE ASSESSEE ONLY TO EARN SOME DIVIDEND. CONSEQUENTLY WE ALLOW THE AP PEAL BY REVERSING THE ORDER OF THE TRIBUNAL AND BY RESTORING THE DISA LLOWANCE CONFIRMED IN FIRST APPEAL. :-10-: I.T.A. N0. 209/MDS/2017 IN OUR VIEW, THE ABOVE RATIO FULLY APPLIES IN THIS CASE AND HENCE, THE CIT(A) ORDER IS SET ASIDE AND THE ORDER OF THE AO IS RESTO RED. 4. IN THE RESULT, THE REVENUES APPEAL IS ALLOWED. ORDER PRONOUNCED ON TUESDAY, THE 5 TH DAY OF SEPTEMBER, 2017 AT CHENNAI SD/- ( . . . ) (N.R.S. GANESAN) !' /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) ' /ACCOUNTANT MEMBER /CHENNAI, 0 /DATED: 05 TH SEPTEMBER, 2017 JPV &)1232 /COPY TO: 1. %/ APPELLANT 2. )*% /RESPONDENT 3. 4 ( )/CIT(A) 4. 4 /CIT 5. 2) /DR 6. 7 /GF