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2017 (6) TMI 1345 - AT - Income TaxDisallowance of interest u/s.36(1)(iii) - disallowing entire interest on term loans/working capital loans paid to banks/others treating them to be capital in nature on the assumption that all these loans were utilized for investment in its wholly owned foreign subsidiary i.e. Aban Holdings Pte Limited - HELD THAT:- As decided in own case [2016 (10) TMI 807 - ITAT CHENNAI] we are inclined to remit the issue to the file of AO on similar direction. Further, we direct the AO to verify whether the investment is made in subsidiary to have a controlling interest, or to avoid the dilution of controlling interest, or to keep the controlling interest intact as per object clause of Memorandum of Association of the assessee company and to decide thereupon. Hence, this ground is partly allowed for statistical purposes. Disallowance u/s.14 A - assessee accounted an amount as dividend income from mutual funds / shares during the year and claimed the same as exempt u/s.10(34) - HELD THAT:- As decided in own case [2016 (10) TMI 807 - ITAT CHENNAI] AO has to consider the assessee’s own fund i.e. capital and reserves as available on the date of investment which yields exempted income and thereafter he shall apply the Formula in Rule 8D and also exclude investments in subsidiaries. With this observation, we remit the issue relating to disallowance u/s.14A r.w.r.8D to the file of AO for fresh consideration. Hence, this ground is allowed for statistical purposes. TDS u/s 195 - expenditure incurred on account of management fees and consultancy charges paid outside India -Disallowance u/s.40(a)(i) - HELD THAT:- The Explanation incorporated in section 9 declares that “where the income is deemed to accrue or arise in India under clause (v),(vi) and (vii) of sub-sec.(1), such income shall be included in the total income of the non-resident, whether or not be resident as a residence or place of business or business connection in India”. The plain reading of the said provisions suggests that criterion of residence, place of business or business connection of a non-resident in India has been done away with for fastening the tax liability. However, the criteria of rendering service in India and the utilization of the service in India to attract tax liability u/s.9 (i)(vii) remained untouched and unaffected by the Explanation to Sec.9 of the Act and outside India. Therefore, the twin criterion of rendering of services in India and utilization of services in India become evidently necessary condition to deduct tax However, in respect of said payments, the rendering of services being purely off shore and outside India, the whatever paid towards said services does not attract tax liability. We inclined to remit the issue to the file of Assessing Officer to examine the issue afresh in the light of above order along with concerned DTAA and decide thereupon. The issue is partly allowed for statistical purposes. Disallowance of depreciation u/s.32 for non deduction of TDS - assessee has claimed depreciation @ 20% towards Dry Docking Expenses, which was capitalized for which the assessee should have deducted TDS u/s.195 - HELD THAT:- We are of the opinion that the depreciation cannot be disallowed which is to be granted on the cost of capital assets on which there is no question of TDS. See M/S. CRESCENT CHEMSOL PVT. LTD. VERSUS THE ACIT 10 (1) , MUMBAI. [2011 (3) TMI 1808 - ITAT MUMBAI] Admission of additional ground - Disallowance of FCCB expenditure - claim of premium on FCCB in the return or revised return - assessee has taken a plea before the DRP to consider this issue, but refused to entertain it on the reason that it was not before the TPO/AO - HELD THAT:- As all the facts are available on record and assessee made a claim, it is appropriate to remit the issue to the file of AO for his consideration. In view of the judgement of Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT [1996 (12) TMI 7 - SUPREME COURT], wherein it was held that a legal ground can be raised at any stage of appeal. Thus this issue is remitted back to the file of AO, if require, the AO should call for remand report from the TPO and decide the issue in accordance with law and on merit, we refrain from commenting on merits as the lower authorities to decide it. Hence, this ground is remitted to the file of AO for fresh consideration. Claim of withholding tax u/s.90 - HELD THAT:- As decided in own case [2016 (10) TMI 807 - ITAT CHENNAI] we are inclined to hold that once the interest income subject to tax in any manner in the hands of the assessee, the corresponding tax credit to be given. Accordingly, this ground is remitted to the AO to examine the issue in the light of our above findings.
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