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2016 (2) TMI 1081 - ITAT CHANDIGARHAddition u/s 14A - Held that:- If there are interest free funds available a presumption would arise that investment would be out of the interest free funds generated or available with the company if the interest free funds were sufficient to meet the investment.Therefore, in such circumstances, no disallowance under section 14A of the Act on account of interest can be made. - Decided in favour of assessee. Disallowance being the difference of interest charged from Hero Motors Ltd. @ 6% and interest rate of 7.75% - Held that:- Revenue cannot justifiably claim to put itself in the armchair of a businessman or in the position of the board of directors and assume the said role to decide how much is a reasonable expenditure having regard to the circumstances of the case. It was further held that no businessman can be compelled to maximise its profits. And that the Income Tax Authorities must put themselves in the shoes of the assessee and see how a prudent businessman would work. The authorities must look at the matter from their own view point but that of a prudent businessman. Even the Hon'ble Supreme Court in assessee’s own case [2015 (11) TMI 1314 - SUPREME COURT OF INDIA] had held that applying the said ratio to the facts of the case that no such notional addition on account of lesser rate of interest charged can be made by the assessee. In view of this, the Assessing Officer is directed to delete the addition made by him. Capitalization of interest on the assets appearing under the head ‘capital work-in-progress by adopting the interest @ 7.75% - Held that:- No loan had been raised by the assessee company for the purchase of furnace or for the construction of building. The said finding of the CIT (Appeals) had not been controverted by the learned D.R. for the Revenue. Further the total investment made by the assessee during the year on capital work-in-progress was more as against the net profit of the assessee for the year. See DCIT Vs. Samrat Forgings Ltd. [2012 (5) TMI 760 - ITAT CHANDIGARH ] In view of the above said facts and circumstances, we find no merit in the disallowance made by the Assessing Officer. Addition under section 36(1)(iii) - Held that:- It is an undisputed fact that the assessee was making constant sale and purchases from these two concerns and amounts of money coming and going were on account of regular business of the assessee. During the course of business if some amount remains at the debit of the other company, the Assessing Officer cannot just presume it to be in the nature of loans and advances. Here also, the observations of the Delhi High Court in the case of Dalmia Cement Ltd. (2001 (9) TMI 48 - DELHI High Court ) is pertinent, whereby it was held that it is not the prerogative of the Department to dictate the terms of the business and Revenue cannot impose its view on the businessman when to give any money and when to receive it back. The transactions are going on with the sister concerns on regular business. Steps are being made and even if some amount remains at the debit, the Assessing Officer cannot consider the same as loan and cannot make addition under section 36(1)(iii) of the Act on the same.
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