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2020 (4) TMI 94 - ITAT DELHIDisallowance of interest payment - interest free advances given by the appellant company - whether appellant had advanced the loans and advances from its own funds and not out of the borrowed funds? - HELD THAT:- Loans and advances including interest free advances are far less than the own funds. And hence, the presumption that the own funds have been utilized for extending the loans and advances sets in. When the assessee has got own funds available at their disposal, no disallowance is called for as enunciated in various judgments. The decision in the case of Bright Enterprises Pvt. Ltd. Vs. CIT [2015 (11) TMI 342 - PUNJAB & HARYANA HIGH COURT] it was held that if there are interest free funds available then it will be presumed that these have been made out of interest free funds. Similar view was held in the case of CIT Vs. Kapsons Associates Investment Pvt. Ltd. [2015 (8) TMI 1277 - PUNJAB AND HARYANA HIGH COURT] as held that interest on investment in other properties not for business purpose cannot be disallowed if the assessee is having sufficient interest free funds at its disposal. Similar view was taken by the Hon'ble Supreme Court in the case of Hero Cycles Pvt. Ltd. [2015 (11) TMI 1314 - SUPREME COURT] held that no disallowance is called for if the assessee has got own surplus fund. Keeping in view the fact that the assessee has got sufficient own funds to extend the loans interest free, we hereby direct that the disallowance made under section 36(1)(iii) be deleted. - Decided in favour of assessee. Disallowance u/s 14A r.w.r 8D(2)(iii) - 0.5% has applied on the average investments - AR argued that earning dividends is not an assured activity, no business man will ever incur a recurring in anticipation of non-assured returns especially dividends - HELD THAT:- We hereby hold that the disallowance needs to be restricted to the dividend yielding investment only for the years involved. The Assessing Officer is hereby directed to re-compute the disallowance taking into consideration, the dividend yielding investments -The disallowance under Rule 8D(2)(iii) be restricted to dividend yielding investments to determine the average value of the investments. - Decided in favour of assessee.
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