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2015 (2) TMI 1227 - AT - Income TaxDisallowance of interest attributable to the share application money - addition u/s 14A - Held that:- As rightly contended by the assessee, investment made in the share application money till its conversion into shares being not capable of earning any income, which is exempt from tax, expenditure incurred by the assessee in relation to the making of such investments including interest paid on the borrowed funds to the extent invested in shares application money cannot be disallowed by invoking the provisions of S.14A. CIT(A), in our opinion, therefore, was correct in holding that the provisions of S.14A were not applicable for making disallowance on account of interest attributable to the investments made by the assessee in share application money, but finally confirming the disallowance made by the AO on account of such interest by holding that the same did not represent the expenditure wholly and exclusively incurred by the assessee for the purpose of its business. As regards quantum of interest disallowed by the Assessing Officer, we find that the disallowance of interest computed by the Assessing Officer on compounding basis was not sustainable, as the same resulted in notional disallowance, which is not permissible in law, and the learned CIT(A) therefore, was fully justified in directing the Assessing Officer to verify the actual expenditure incurred by the assessee on account of interest on the borrowed funds utilised for making payment of share application money and to restrict the disallowance to that extent. Disallowance on account of interest attributable to the investment made by the assessee in landed property - Held that:- Learned Departmental Representative has contended that since this submission made by the learned counsel for the assessee now before the Tribunal was not made specifically in that manner before the authorities below, the Assessing Officer may be allowed an opportunity to verify the same. Since the learned counsel for the assessee has no objection in this regard, we restore this issue to the file of the Assessing Officer for deciding the same afresh, after verifying the specific submissions made by the learned counsel for the assessee before us, in accordance with law and after giving sufficient opportunity of hearing to the assessee. Disallowance of interest attributable to the withdrawals made by the assessee out of borrowed funds - Held that:- No case was made out by the assessee before the Assessing Officer to show that the withdrawals for household purposes were made by the assessee out of the profits generated in M/s. Ushodaya News Agency and this claim apparently made by the assessee for the first time before him was accepted by the learned CIT(A) without discussing the relevant facts and figures and without referring to any documentary evidence, which supported the claim of the assessee. As contended by the learned counsel for the assessee, the assessee, however, is in a position to establish his claim by producing the relevant evidence as well as by furnishing the relevant facts and figures. Hew has requested that one more opportunity may, therefore, be given to the assessee to make out its case before the Assessing Officer. Since the Learned Departmental Representative also has no objection in this regard, we set aside the order of learned CIT(A) on this issue and restore this same to the file of the Assessing Officer for deciding it afresh. Addition on account of interest attributable to the investment made by the assessee out of borrowed funds in fixed assets created for the purpose of tourism, but not put to business use - Held that:- a similar exercise has been done by the Assessing Officer in assessment year 2005-06, as per the direction of the learned CIT(A), and a similar direction may be given to the Assessing Officer to do such exercise even for the year under consideration. Since the Learned Departmental Representative has no objection in this regard, we set aside the impugned orders of the lower authorities on this issue, and restore the matter to the file of the Assessing Officer for the limited purpose of working out, as done in the preceding year as per the directions of the learned CIT(A) for that year, the actual quantum of interest actually paid by the assessee on the borrowed funds utilised for the construction of the relevant assets which were not put to use in the year under consideration and restrict the disallowance to that extent.
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