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2016 (5) TMI 933 - ITAT CHANDIGARHDisallowance of proportionate interest under section 36(1)(iii) - Held that:- In any case the assessee had enough interest free funds to make impugned advances and therefore it was to be presumed that the advances had been made out of interest free funds and no disallowance under section 36(1)(iii) was therefore warranted in this case. In view of the above we set aside the order of the Ld. CIT(A) and delete the disallowance of interest made under section 36(1)(iii) of the Act by holding that the advances had been made for business purposes and that the assessee had enough interest free funds for making the same. - Decided in favour of assessee. Disallowance made under section 14A - Held that:- We do not find any infirmity in the order of the Ld. CIT(A), who deleted the disallowance made following the decision of the jurisdictional High Court in the case of Lakhani Marketing [2014 (7) TMI 44 - PUNJAB AND HARYANA HIGH COURT ] The argument of the Ld. DR that the CBDT Circular No. 5/2014 dt. 11/02/2014 stating that even in the absence of any exempt income disallowance under section 14A has to be made, is binding on the Revenue authority, we find has no merit. The Hon'ble Supreme Court in the case of Commissioner of Central Excise, Bolpur Vs. M/s Ratan Melting & Wire Industries [2005 (2) TMI 138 - SUPREME COURT OF INDIA ], has categorically held that decision of the High Court / Supreme Court would overrule Circulars issued by the Boards. - Decided in favour of assessee. Addition made on account of disallowance under section 40(a)(ia) - Held that:- We do not find any infirmity in the order of the Ld. CIT(A) deleting the disallowance by holding that the impugned payment was not liable to tax deduction at source in view of section 194A(3) and thus could not be a subject matter of disallowance under section 40(a)(ia) of the Act. Undeniably the impugned payment of ₹ 64,37,342/- made by the assessee to scheduled banks for opening letters of credit was in the nature of interest as per the provisions of section 2(28A) of the Act but since the amount had been paid to scheduled banks no tax was required to be deducted at source on the same in view of the provisions of section 194A (3)(iii) which categorically exclude interest paid to banks from the perview of tax deduction at source. In view of the above since the assessee was not required to deduct tax at source in the impugned payments the provisions of section 40(a)(ia) were not applicable to the facts of the present case and Ld. CIT(A) has rightly deleted the disallowance made on this account - Decided in favour of assessee.
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