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2017 (8) TMI 1440 - HC - Income TaxDisallowance of interest being the interest referable to interest free loans and advances given to subsidiary companies - Tribunal held that the interest free fund available to the assessee is sufficient to meet its investment - Held that:- We do not see how when the Assessing Officer's views are that in cases of the interest free loans and interest given by the assessee to its subsidiary companies are in the above sums, still, the principle laid down by this Court that if there are funds available to them interest free and overdraft or loans taken, would not apply. This view of the Assessing Officer is ex facie contrary to the settled principle that a presumption would arise that the investment would be out of the interest free funds generated or available with the company. Then, the borrowed capital in hand in that case and interest expenditure was deductible under Section 36(1)(iii) - The Tribunal held that the interest free fund available to the assessee is sufficient to meet its investment. It can be presumed that investments were made from interest free funds available with the assessee. This position clearly emerges from the record and for the current assessment year as well. We do not see how a different view in the facts and circumstances can be taken. If the Tribunal had followed the earlier view and on facts, then, there is no perversity when nothing contrary to the factual material was brought on record by the Revenue. In such circumstances, the concurrent view on disallowance of interest was reversed and the appeal of the assessee to that extent was partly allowed. We do not see any substantial question of law arising from such a view of the Tribunal. Claim of depreciation - whether Hon'ble Tribunal was right in holding that prior to insertion of Explanation-5 to section 32 the claim of depreciation was optional and could not be thrust on the assessee, if it had not claimed it? - Held that:- The Tribunal found that going by the wording of the ground and which is identical to question No.6.6, reproduced above, it is not permissible to apply the Explanation and, therefore, the claim of depreciation which was optional could not be thrust on the assessee for the prior period. This is an attempt made by the Revenue even in the assessment year under consideration and in an oblique or indirect manner. It is that finding of fact which has been rendered against the Revenue. No substantial question of law emerging from such an approach of the Tribunal Pre-operative expenses incurred in connection with creation of plant and machinery in units which have not commenced production - Held that:- Tribunal held that it has considered identical issue on facts in the prior assessment year 2002-03 and its order dated 28-5-2012 in the appeal pertaining to that assessment year, it had turned down the Revenue's request and answered the issue in favour of the assessee. Therefore, when identical issue arose and on similar facts for the assessment year under consideration, it is on facts that the earlier view was followed. Once the earlier view was followed on facts and the same not being disputed, then, the settled principle would apply in that the Revenue is bound by the view taken by the Tribunal for the prior assessment years on facts and that applies with full force. More so, when it is allowed to gain finality. Disallowance u/s 80M - assessee claimed deduction under Section 80M in respect of the entire dividend income without apportioning any expenditure against the said income - Held that:- Hon'ble Supreme Court in the case of Distributors (Baroda) (P.) Ltd. v. Union of India [1985 (7) TMI 1 - SUPREME COURT] it is only the actual expenses incurred for earning the dividend income which ought to be taken into consideration and there is no question of making an estimation or assumption. The above issue was also considered by the Tribunal in the assessee's own case and for the Assessment Year 2001-02 Correct rate of guarantee commission - Held that:- The charging of guarantee commission depends upon transaction to transaction and mutual understanding between the parties. A rate of 2.5% for guarantee commission therefore cannot be applied in the absence of relevant and cogent material. The Tribunal, therefore, came to the conclusion that this exercise of the First Appellate Authority has been carried out to its satisfaction. The assessee itself paid the guarantee commission at the rate varying from 0.25% to 0.6% per annum to third party and when it has not incurred any cost for providing guarantee to the Bank for the loan given to its subsidiary, applying the rate of 2.5% by the Transfer Pricing Officer based on external comparables was not justified.
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