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2014 (2) TMI 1234 - AT - Income TaxDisallowance of interest made u/s 14A - CIT(A) deleted the disallowance on the reasoning that the assessee did not incur any interest expenditure for earning tax free dividend - Held that:- The interest income has been received from bank deposit, while interest payment is made to directors and not against any bank loan. Hence, in our view, the question of netting off interest will not arise. In view of the foregoing discussions, in our view, the AO was justified in making disallowance of part of interest expenditure in terms of Rule 8D(2)(ii) of the Income tax Rules read with section 14A of the Act. Accordingly, we set aside the order of Ld CIT(A) on this issue and restore the addition made by the assessing officer. Disallowance u/s 36(1)(iii) - CIT(A) deleted the addition - Held that:- There is no dispute that the assessee was required to invest a sum of ₹ 3.70 crore as per the above said agreement. Further the terms of the agreement also show that the assessee was selected as a turnkey contractor for executing the project. According to the assessee, a special purpose vehicle, viz., M/s Hassan Biomass Power Company Private Ltd was formed and the assessee has contributed a sum of ₹ 3.25 crores towards its share capital. According to the Ld A.R, the other share holder was M/s Nucon Energy Group, Mauritius. We notice that these factual aspects have not been examined by the assessing officer. However, the factual position narrated by the Ld A.R would show that the assessee was having a commercial interest and also obligation in making investment of ₹ 3.25 crores, referred above. Besides the above, the assessee has also supplied the materials to M/s Hassan Biomass power company Pvt Ltd. We notice that the said investment has been made in the earlier years, i.e., it is reflected in the Balance sheet as at 31.3.2005. Under these set of facts, the Ld CIT(A) has expressed the view that the investment of ₹ 3.25 crores cannot be said to be for non-business purposes. In view of the foregoing discussions, we are also inclined to accept the view expressed by Ld CIT(A). Accordingly, we uphold his view on this issue. Sale of shares - "Income from business" OR "Capital gains" - Held that:- The tax authorities have reached their own conclusions without properly appreciating the facts surrounding the issue, particularly the clarificatory letter issued by the tax auditor, the frequency of transactions etc. Hence, in our view, this issue requires fresh examination at the end of the assessing officer. Accordingly, we set aside this order of ld CIT (A) on this issue and restore the same to the file of the AO with the direction to examine the issue afresh by duly considering all the materials that may be produced by the assessee and also the facts surrounding the issue and take appropriate decision in accordance with the law.
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