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2013 (11) TMI 1331 - AT - Income TaxInterest as expenditure u/s 36(1)(iii) of the Income tax act – Money borrowed at higher rate and money lent at lower rate of interest – Allowability of interest – Held that:- Reliance has been placed upon the order of ITAT “D” Bench Ahmedabad in assessee’s own case titled as The Dy. CIT vs. Aditya Medisales Ltd [2013 (9) TMI 114 - ITAT AHMEDABAD ], which is decided in favor of assessee, wherein it was held that the assessee had its own substantial interest-free funds out of which advances have been made. An another noting has been made that the Revenue had not made out a case that interest bearing borrowed funds have been diverted to the group concerns by charging lower rate of interest – In the present case, for the years under consideration, in the absence of any contrary material placed on record from the side of the Revenue, there is no option but to follow the past precedent as held in assessee’s favour vide series of orders. Therefore, the result is that the ground as raised by the Revenue stood covered in assessee’s favour, hence dismissed – Decided against the Revenue. Invocation of section 14A read with Rule 8D with retrospective effect from 1.4.1962 - For AY 2005-06, 2006-07, assessee had received the Dividend Income of Rs.1,30,66,287/- (AY 05-06) and Rs.1,50,76,485/- (AY 06-07) stated to be on equity shares of Sun Pharmaceuticals Ltd. Dividend was claimed exempt u/s.10(34) r.w.s. 115-O of IT Act - expenses like interest on the funds borrowed for investment relating to the earning of exempt income be disallowed u/s.14A of IT Act – Held that:- Relying upon the decision in the case of M/s.Daga Capital Management Pvt.Ltd[2008 (10) TMI 383 - ITAT MUMBAI ], it was held that the provisions of section 14A(2)&(3) of the I.T.Act being clarificatory in nature will apply retrospectively even though they have been introduced by Finance Act, 2006 w.e.f. 1.4.2007. Section 14A has been inserted retrospectively by Finance Act, 2001, with effect from 1.4.1962 – As provisions of section 14A(2) & 14A(3) are also retrospective in nature and in result Rule 8D will also apply accordingly. In the present case, the Comm.(A) has held that in the absence of “fundflow- statement” an amount @ 10% of the dividend received was to be disallowed towards interest incurred towards investment in exempt income. Resultant an amount for AY 05-06 was taxed. For AY 06-07, the AO had held that interest bearing funds was utilized in financing the cost of acquisition of shares. The provision of Rule 8D r.w.s. 14A were applied - In the instant case, in the appeal before ITAT, remanded the entire issue of disallowance of interest and other expenditure under section.14A back to the file of the Learned Assessing Officer for fresh adjudication in the light of the decision of Hon'ble Bombay High Court in the case of Godrej and Boyce Mfg. Co. Ltd. v. Deputy Commissioner of Income-tax [ 2010 (8) TMI 77 - BOMBAY HIGH COURT]- Decided in favor of Revenue.
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