The assessee made investment in shares from which tax-free dividend income was earned. The assessee’s total investment in shares was 12 per cent. of the borrowed funds. Therefore, the Assessing Officer disallowed being the proportionate interest at the rate of 12 per cent. of the total interest paid. The Commissioner (Appeals) deleted the addition.  Tribunal held that CIT(A) had noted after perusal of the balance-sheet of the assessee for the assessment year 2004-05 that the assessee had own funds whereas investment in shares is 11 per cent. of the assessee’s own funds and therefore there cannot be disallowance based on the reasoning of AO. (AY. 2004-05).