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2014 (11) TMI 356 - HC - Income TaxDisallowance u/s 14A r.w Rule 8D – Interest expenses on dividend income – Held that:- The Tribunal was rightly of the view that once it was duly established that no borrowed funds on which interest was paid had been invested for earning tax free income, no disallowance was permissible u/s 14A - under Rule 8D(2)(ii), a proportionate disallowance out of interest expenditure would be made in respect of interest expenditure which is not directly attributable to any particular income or receipt - Since the entire interest expenditure was attributable to business in which the resultant income was assessable to tax, a disallowance could not be made - The Tribunal rightly deleted a disallowance partially u/s 14A, sustaining the balance of ₹ 0.96 lacs on account of other expenditure to the extent of 0.5 percent of the average value of investment – Relying upon Dhampur Sugar Mills Ltd, Bijnor Vs Commissioner of Income Tax, Bareilly [2014 (9) TMI 791 - ALLAHABAD HIGH COURT] – Decided against revenue. Expenses incurred on transmission lines and contribution paid to the Uttar Pradesh Power Corporation Limited disallowed – Capital expenses or not - Held that:- In Empire Jute Co Ltd Vs Commissioner of Income Tax [1980 (5) TMI 1 - SUPREME Court] it has been held that the true test is to consider the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable - the expenditure which was incurred by the assessee in the laying of transmission lines was clearly on the revenue account - Upon the erection of transmission lines, they were to vest absolutely in UPPCL - The expenditure which was incurred by the assessee was for facilitating the efficient conduct of its business since the assessee had to supply electricity to its sole consumer UPPCL - This was not an advantage of a capital nature – thus, the order of the Tribunal is upheld – Decided against revenue.
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