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2014 (3) TMI 532 - AT - Income TaxDeductibility of the interest expenditure – Held that:- CIT(A) has correctly appreciated the facts and the law to hold that the matter of grant of interest being sub-judice before the Special Court, the same may be allowed where so granted for the relevant year - the order is confirmed subject to a modification that the interest to be allowed, in-as-much as the same is to be by way of deduction against interest income, assessable as income from other sources, cannot exceed the rate at which the interest on deposit/s stands earned by the assessee, on an average, for the relevant period - only the expense incurred for the purpose of earning the interest income is to be allowed u/s. 57 of the Act - Payment of interest at a higher rate implies a gross loss, with no contractual obligation to pay interest having been established, so that the payment of interest at a higher rate cannot either conceivably. Computation of book profit u/s.115-JB of the Act – Held that:- CIT(A) has also held o that his order merits being upheld - the assessee has suo motu disallowed Rs.110.86 lacs out of the total interest claim of Rs.118.96 lacs u/s.14A of the Act - The same being qua a direct interest expenditure would also have a direct bearing on the computation of the book profit under Explanation 1(f) below section 115JB(2) - the reduction of the sum in computing the book profit u/s.115JB shall be subject to the interest liability being ascertained - only to the extent it does not represent a direct interest expenditure covered under Explanation 1(f) - the assessee having itself disallowed Rs.110.86 lacs u/s.14A, so that it is in respect of an expenditure booked in accounts and, further, in relation to income that does not form part of the total income – Decided partly in favour of Assessee. Deletion of the interest charged u/ss.234A, 234B and 234C of the Act – Held that:- The decision in CIT vs. Divine Holdings Pvt. Ltd. [2012 (4) TMI 100 - BOMBAY HIGH COURT] - The levy of interest under the provisions of Sections 234A, 234B and 234C is mandatory in nature - the Tribunal was in error in coming to the conclusion that interest under Sections 234A, 234B and 234C cannot be levied on an assessee – thus, the levy of interest under the relevant sections is upheld – Decided in favour of Revenue.
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