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2019 (6) TMI 146 - ITAT MUMBAIDisallowance of interest u/s 36(1)(iii) - difference in rate of interest between the borrowals made by the assessee from bank and interest charged on loans advanced to subsidiary - HELD THAT:- It is not disputed that Patel Engineering Ltd. and Patel Realty Ltd. are wholly owned subsidiaries of the assessee. Therefore, the assessee has a stake in the performance and profit making of these companies. That being the case, it cannot be denied that the advancement of loan to the aforesaid subsidiaries is in connection with assessee’s business. Moreover, it is not a case where the assessee has advanced loans to subsidiaries without charging any interest. In fact, the assessee has charged interest @ 12% on the loans advanced to the subsidiaries. Therefore, the difference in the interest rate between the borrowed funds and loans advanced is only 3.25%. In any case of the matter, since the assessee had advanced the loan in connection with its business, no disallowance u/s 36(1)(iii) could be made as per the ratio laid down in the decisions cited by the learned Authorised Representative. - Ground raised is allowed. Disallowance u/s 14A r/w rule 8D - HELD THAT:- There is no dispute that in the previous year relevant to the assessment year under dispute, the assessee had earned exempt income by way of dividend amounting to ₹ 3,663 only. Whereas, the AO computed disallowance under rule 8D(2) r/w section 14A. As per the settled legal principle, disallowance of expenditure attributable to earning of exempt income in terms of section 14A cannot exceed the exempt income earned during the year. In this context, we refer to the decision cited by the AR. That being the case, the order passed by the learned Commissioner (Appeals) on the issue deserves to be upheld. Grounds are dismissed.
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