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2014 (1) TMI 75 - AT - Income TaxDisallowance of Interest on Inter Company Deposit u/s 36(2)(iii) of the Act – Held that:- Unsecured loans on which assessee had paid interest were carried over from the earlier year and in the earlier year interest was claimed - A part of the unsecured loans which was outstanding in the beginning of the year was reduced during the year - between the period from April, 2004 to 31st March 2005 the company had raised a significant amount in the form of equity shares and as on 31.3.2005 it had a cash and bank – thus, the assessee had sufficient interest free funds which were placed as an ICD without interest - This fact is further strengthened from the fact that unsecured loans raised by assessee raised in earlier years were already invested into business assets – Following CIT v. Reliance Utility & Powers Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY] - assessee was having a mixed pool of interest bearing funds and non interest bearing funds and since the unsecured loans were carried over from earlier years, it can safely be concluded that interest bearing funds raised in the earlier years and brought forward in the current year were for deployed in the business of the company which means that interest free ICDs were made out of interest free funds of the company – Decided in favour of Assessee. Disallowance of amount paid to ROC towards expenses – Expenses incurred for increasing authorized share capital of the Company – Held that:- Following CIT v. Multi Metals Ltd. [1990 (10) TMI 55 - RAJASTHAN High Court] - expenditure to be eligible u/s 35D(2)(c)(iv) of the Act being allowable as 1/10th of the expenditure for a period of ten years – thus, the assessee can claim only 10% of such expenditure in this year u/s 35D – Decided partly in faovur of Assessee.
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