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2015 (10) TMI 1511 - AT - Income TaxDisallowance under section 14A - CIT(A) restricted the addition - Held that:- Ld. DR of the department could not point out any new fact or law arising out in the case under consideration which may justify our interference in the above well reasoned order of the CIT(A) that the interest expenditure was attributable to the business activities and not to the investment activity. Had there been no such investment, the interest expenditure would have remained the same. He therefore rightly held that the interest expenditure was not attributable to investment activity. He further observed from the balance sheet that there was a decrease in borrowed funds on which interest expenditure was incurred. Therefore, the increase in investment during the year could not be related to the borrowed funds. He further observed that as per cash flow statement in the balance sheet, the company was having cash balance which was increased during the year. He therefore considering the overall facts and circumstances of the case observed that no indirect interest expenses were attributable to investment activity and could not be related to earning of exempt dividend income. He therefore correctly deleted the disallowance of indirect interest expenditure of ₹ 98,50,220/- . The Ld. CIT(A) however upheld the disallowance of administrative and managerial expenses pertaining to management of investments which had yielded exempt dividend income made by the AO as per formula provided in sub clause (iii) of rule 8D(2) at ₹ 9,45,855/- - Decided against revenue. Disallowance of interest expenditure while computing the long-term capital gain on account of cost of improvement - CIT(A) deleted the addition - Held that:- Admittedly, the compensation was paid to M/s. Tropicana for release of its rights over the said land in question. The interest component was part of the settlement. The principal amount of compensation had already been allowed by the AO as revenue expenditure. The interest expenditure paid for the said land for relinquishment of development rights by M/ s. Tropicana Properties Ltd, ultimately resulted in enhancement of value of the property and the development rights of the said land became available to the assessee on incurring of such interest expenditure. We therefore do not find any infirmity in the order of the CIT(A) in holding that the interest expenditure was nothing but cost of improvement allowable while computing the capital gains. Decided in favour of the assessee.
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