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2015 (1) TMI 156 - AT - Income TaxInterest of ₹ 43,78,306/- on interest bearing advances to subsidiary companies disallowed - Restriction of 5% of dividend income - Held that:- Assessee has explained the availability of huge interest free funds for making the investment in subsidiary and also advances given to them on the basis of detail analysis of its fund - assessee had share capital reserve and surplus which also included cash generated from disposal of investment and issuance of furnishing equity shares which aggregated to 5968 lakhs - out of such surplus funds which are interest free the assessee has invested sum of ₹ 514,75,308 in the subsidiary - Thus, the surplus funds were sufficient to meet the advances in the investment made in the subsidiary CIT(A) has given a categorical finding that the interest bearing funds have been used for business purpose and there is a nexus between interest expenditure incurred and loan taken by the assessee the order of the CIT(A) is upheld and no disallowance of interest is called for. CIT(A) rigfhtly was of the view that in the year, disallowance u/s 14A cannot be made after applying rule 8D which is admittedly applicable from the AY 200809 - For the AY 200708, some reasonable disallowance should be made, which the CIT(A) has made 5% of the dividend income - Such a disallowance appears to be reasonable looking to the facts and circumstances of the case thus, the order of the CIT(A) is upheld. Disallowance u/s 14A while computing book profit u/s 115JB Held that:- It has already been directed by the CIT(A) to be made, which is 5% of the dividend income and accordingly, such directions of the CIT(A) is upheld Decided against revenue.
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