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2019 (12) TMI 1034 - ITAT MUMBAIDeduction of interest incurred on zero coupon bonds u/s 36(1)(iii) OR u/s 57(iii) as claimed by the appellant - HELD THAT:- After perusing the order of the CIT(A), especially interest pertaining to advance made in earlier years we observe that the assessment for A.Y. 2011-12 has also been framed and the said claim of the assessee under Section 57(iii) of the Act has been allowed by the AO as is apparent from the copy of the assessment order filed at page Nos. 24 & 25 of the Paper Book. We further note that Revenue has not taken any step for reopening the assessment for A.Y. 2011-12. Further assessee’s own fund in the form of share capital is only ₹ 24.50 lakhs and thus there is merit in the contentions of the assessee that the entire amount of interest expenditure is to be allowed to the assessee considering the fact that the amounts advanced were out of loaned money Besides , once interest expenditure has been allowed in a particular year, the same cannot be disallowed in the subsequent year unless there is change in the facts. Similarly, the case of the assessee is also supported by several cases, namely CIT vs. Sridev Enterprises [1991 (1) TMI 52 - KARNATAKA HIGH COURT] Escorts Ltd. vs. ACIT [2006 (1) TMI 186 - ITAT DELHI-G] , Malwa Cotton Spg. Mills vs. ACIT [2003 (12) TMI 274 - ITAT CHANDIGARH-A], ITO vs. J.M.P. Enterprises [2005 (12) TMI 209 - ITAT AMRITSAR] and other decisions referred to above wherein the common ratio is that once an expense is allowed in the earlier year some cannot be disallowed in the subsequent year unless there is a change of facts during the year vis-a-vis earlier years. Therefore after considering the facts of the case in the light of the decisions relied upon by the learned A.R., we are of the considered opinion that interest expenditure in respect of opening balance of amount advanced is to be allowed. Accordingly we set aside the order of the CIT(A) on this issue and direct the AO to allow interest relating to advance made in earlier years. Interest relating to advances made during the year - Since the assessee’s own funds were only to the tune of ₹ 24.50 lakhs, which means that money advanced by the assessee has been out of the borrowings only and therefore where there is no direct nexus available, we are convinced with the arguments of the AR that interest should be allowed on proportionate basis. We also find merit in the contentions of the assessee that interest expenditure corresponding to interest income other than interest received from Essar Oil Ltd. is to be allowed. We note that the total interest income during the year was ₹ 125.58 crores out of which interest received from Essar Oil Ltd. is ₹ 102.02 crores as observed by the learned CIT(A) on page No. 46, para 78 of the appellate order and therefore in our opinion assessee has to be allowed interest expenditure in respect of interest income other than interest received from Essar Oil Ltd. Needless to say that computation of corresponding interest expenditure has to be on proportionate basis, as observed earlier, wherever no direct nexus is available. Considering the facts in the light of the discussions given hereinabove we are restoring the issue of calculation of interest expenditure to the file of AO with the direction as contained hereinabove i.e (i) to calculate correct amount of interest in respect of advances given in earlier years,(ii) calculate the correct amount of interest pertaining to advances made during the year and (iii) to calculate interest expenditure corresponding to interest income other than interest received from Essar Oil Ltd. and allow the same. The issue is restored for the limited purpose of calculation. Ground is allowed for statistical purposes. Disallowance u/s 14A under the normal provisions of the Act as well u/s 115JB - HELD THAT:- CIT(A) recorded clear cut finding that the assessee has not claimed any expenditure in computation of income. Similarly, while discussing the computation of book profit under Section 115JB of the Act the learned CIT(A) at page No. 95 onwards has given a finding that the assessee has already disallowed expenditure under Section 14A of the Act on which the learned AO has failed to give any contrary findings. Under these facts and circumstances, we are not inclined to interfere in the order of the CIT(A) and accordingly the grounds raised by the Revenue are dismissed.
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