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2013 (9) TMI 364 - AT - Income TaxDisallowance u/s 14A - Earlier CIT(A) held that interest on nostro account is Not taxable - later decision of CIT(A) reversed - Held that:- Once the income itself was chargeable to tax, there can be no question of computing any disallowance under section 14A, the mandate of which operates to disallow deduction for expenses incurred in relation to income which does not form part of the total income under the Act - The interest income on nostro account was liable to be included in the total income - Accordingly, grounds raised by the assessee against the enhancement done by the learned Commissioner of Incometax (Appeals) by invoking the provisions of section 14A were also consequently allowed. Allowability of Broken Period Interest as Expenditure – Held that:- The interest paid in respect of the broken period be set off against the interest received in respect of the broken period - following its decision for the assessment year 1991-92, had decided this issue against the Revenue. Exemption of Gross Interest u/s 10(15) - the issue was against the exemption in respect of "gross interest" earned from tax-free security under section 10(15) of the Act – Held that:- Exemption under section 10(15) was on gross basis and in the facts and circumstances of the case, there can be no disallowance under section 14A qua the investment in taxfree securities - Following Dresdner Bank AG v. Addl. CIT [2006 (10) TMI 175 - ITAT BOMBAY-F] - it becomes apparent that exemption under section 10(15) was to be allowed on gross interest and not on the net interest - East India Pharmaceutical Works Ltd. v. CIT [1997 (3) TMI 5 - SUPREME Court] - if there be interest-free funds available to the assessee sufficient to meet its investment and at the same time loan has been raised, it can be presumed that the investments were made from interest-free funds and resultantly no disallowance of interest can be made – Decided against Revenue. Deduction u/s 44C – Following The Joint Commissioner of Income-tax Versus M/s. American Express Bank Limited [2012 (8) TMI 371 - ITAT MUMBAI] - Exclusive expenses incurred by the head office for Indian branch were outside the purview of sec. 44C and only common head office expenses were governed by this section - Once the amount was found to be incurred exclusively by H.O. towards the Indian branch, the same was required to be allowed in terms of section 37(1) without any reference to section 44C. Interest Received u/s 244A – Held that:- Interest under section 143(1)(a) was assessable to tax in the year in question. The proposition as raised by the learned authorised representative is about the rate of tax which should be applied on such interest – Relying upon CIT v. Clough Engineering Ltd. [2011 (5) TMI 562 - ITAT, DELHI ] - the claim for refund of income-tax cannot be said to be effectively connected with the receipts of permanent establishment and hence interest on refund of tax was taxable under article 11(2) of the Double Taxation Avoidance Agreement between India and Australia and not under article 7 read with article 11(4) - if the Assessing Officer was directed to adopt the rate at which such interest on income-tax refund should be charged by examining the relevant clauses of the Double Taxation Avoidance Agreement between India and France, in conformity with the aforenoted Special Bench order.
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