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2015 (8) TMI 844 - AT - Income TaxDisallowance of depreciation by applying Explanation 10 to section 43(1) - CIT(A) deleted disallowance - Held that:- Capital subsidy scheme is exactly identical as was in AY 2007-08 in assessee’s own case considering that in AY 2003-04 & 2004-05, no such partial disallowance of depreciation was made by reduction of subsidy from actual cost/w.d.v of fixed assets along with the act that in last year, such partial disallowance of depreciation was deleted by my predecessor in office and also considering the judgments cited by the appellant, the action of the AO in reducing the subsidy from the cost/w.d.v of assets for allowing depreciation u/s. 32 is held to be not tenable and addition made on this account is deleted and Hon’ble High court has not admitted the question referred to by revenue u/s. 260A of the Act regarding depreciation on capital subsidy. Once Hon’ble High Court has declined to admit the question, order of Tribunal has become final. Accordingly, this issue is covered in favour of the assessee and against the revenue. Hence, we confirm the finding of CIT(A) and this issue of revenue is dismissed. - Decided in favour of assessee. Disallowance of expenses qua interest against exempt income by invoking the provision of section 14A - CIT(A) deleted disallowance - Held that:- Now the revenue could not establish that the investments made in shares giving exempted income is out of borrowed funds on which interest is paid by assessee. There is no nexus whatsoever. On specific query Ld. Sr. DR could not controvert that the assessee has made in investment in shares giving exempt income out of own funds which is at about 2429 lacs and investment is at ₹ 365 lacs only. Once this fact has not been denied and CIT(A) has categorically observed that the assessee has made investment in shares out of its own funds no disallowance can be attributed qua the interest paid on borrowed funds for investing the same in interest free funds. In view of the above, we confirm the order of CIT(A) on this common issue. - Decided against revenue.
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