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2019 (6) TMI 163 - ITAT CHANDIGARHDeduction claimed u/s 80IA - allocation of expenses - HELD THAT:- CIT(A) rightly held that there was no justification on the part of the Assessing officer to disallow the entire claim of deduction claimed by the assessee. If the Assessing officer was of the view that the assessee had exaggerated the profits of the units eligible for deduction u/s 80IA , at the most, he could have allocated some part of the profits to non eligible units but without making any such exercise, he disallowed the entire claim of deduction. The Ld. CIT(A) has also observed that even otherwise though the profits of the eligible units were at ₹ 59.29 crores, however, since the gross income of the assessee from all units was at ₹ 25.60 crores, the claim was restricted to that extent. The Ld. CIT(A) observed that any minor variation in the profits of the eligible units would not make any difference. Even otherwise, if the profits of the eligible units are to be computed on turn over basis, the resultant effect will be the enhancement of the profits than that has been declared by the assessee. - Decided against revenue Addition u/s 14A r.w. Rule 8D - expenditure incurred for earning of tax exempt dividend income - CIT(A) restricted the disallowance u/s 14A to the extent of tax exempt income - HELD THAT:- disallowance u/s 14A cannot exceed the tax exempt income earned by the assessee. See WINSOME TEXTILE INDUSTRIES LTD. [2009 (8) TMI 220 - PUNJAB AND HARYANA HIGH COURT] and CHEMINVEST LIMITED [2015 (9) TMI 238 - DELHI HIGH COURT]. Disallowance of notional interest u/s 36(1)(iii) - investment made on CWIP - HELD THAT:- We find from the chart that in the year under consideration the paid up capital of the assessee for the year under consideration was at ₹ 10.42 crores, reserves and surplus at ₹ 297 crores and apart form that profit during the year was of ₹ 101 crores totalling ₹ 408 crores. Apart from the aforesaid work in progress, the total investments of the assessee at the end of the year was at ₹ 6.36 crores. The total amount incurred by the assessee on investments as well as capital work in progress is a meager amount as compared to the own funds available with the assessee. The issue is now squarely covered by the various decisions of the High Courts including that of the decision of CIT Vs. Kapsons Associates’ [2015 (8) TMI 1277 - PUNJAB AND HARYANA HIGH COURT] and the latest decision of the Coordinate Bench of the Tribunal in the case of ACIT Vs. Janak Global Resources Pvt Ltd [2018 (12) TMI 902 - ITAT CHANDIGARH] holding that that if the assessee is possessed of sufficient own interest free funds to meet the investments / interest free advances, then, under the circumstances, presumption will be that interest free advances / investments have been made by the assessee out of own funds / interest free funds There is no basis to apply the presumption that the assessee might have used the borrowed funds for CWIP, when as noted above, the assessee was possessed sufficient own funds. - Decided in favour of assessee Disallowance of interest u/s 14A r.w. Rule 8D - HELD THAT:- So far as the disallowance in respect of interest expenditure under Section 14A r.w. Rule 8D(2)(ii) is concerned, since the assessee was possessed of sufficient own funds to meet the investment, hence, the issue is covered by the decision of the Coordinate Bench of the Tribunal in the case of ‘ACIT Vs. Janak Global Resources Pvt Ltd’ [2018 (12) TMI 902 - ITAT CHANDIGARH]. This issue is also now squarely covered by the latest decision of ‘CIT (LTU) Vs. Reliance Industries Ltd.’ [2019 (1) TMI 757 - SUPREME COURT] wherein, reiterated the proposition that if there are interest funds available with the assessee, which are sufficient to meet the investment, it can be presumed that the investments are made from the interest free funds available with the assessee. So far as the action of the CIT(A) in directing to calculate the disallowance under Rule 8D(2)(iii) in respect of administrative expenditure incurred on earning of tax exempt income is concerned no infirmity in the order of the CIT(A) on this issue.
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