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2019 (3) TMI 1581 - AT - Income TaxAddition u/s.36(1)(iii) - disallowance of interest in respect of capital WIP - sufficiency of own funds - HELD THAT:- The own fund of the assessee exceeds the amount of capital work in progress. Therefore, a presumption can be drawn that there was no borrowed fund used in such capital work in progress. Accordingly, the question of utilization of borrowed fund in such capital work in progress does not arise. Accordingly, there cannot be any disallowance on account of interest expenses as made by the AO. In holding so, we find support and guidance from the judgment of Hon’ble Bombay High Court in the case of Reliance Utilities and Power Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT]. Also see HDFC BANK LTD. [2014 (8) TMI 119 - BOMBAY HIGH COURT] - decided in favour of assessee. Disallowance u/s.14A r.w.r 8D - No exempt income earned by the assessee in the year under consideration - HELD THAT:- It is an undisputed fact that there is no exempt income earned by the assessee in the year under consideration in respect of the investment in shares as discussed above. Once it is on record that there is no dividend income/exempted income then the question of making the disallowance u/s 14A does not arise in view of the judgment of Hon’ble Gujarat High Court in the case of Corrtech Energy (P) Ltd . [2014 (3) TMI 856 - GUJARAT HIGH COURT]. No disallowance u/s 14A as made by the AO. - decided in favour of assessee. Disallowance of prior period expenses - AO disallowed expenses and held that expenses related to earlier years are not allowed as no corresponding income has been offered. Further, no copy of bills and invoices has been submitted as contended by him - HELD THAT:- The assessee in the year under consideration and in the earlier years was paying the tax at the maximum marginal rate. As such there was no loss to the Revenue as the assessee was very much entitled to the deduction of such expenses in the earlier year. Thus merely the assessee omitted to claim the expenses in the earlier year cannot be a ground for the disallowance for the year under consideration. In this regard we find support and guidance from the judgment of Hon’ble Gujarat High Court in the case of Indian petrochemicals corporation Ltd . [2016 (9) TMI 110 - GUJARAT HIGH COURT] - decided in favour of assessee. Addition u/s 41(1) being the cessation of liability - assessee submitted liability has not been ceased to exist and no benefit by way of cessation or remission in respect of any trading liability is obtained under the meaning of u/s 41(1). The assessee is still under the legal obligation to make the payment - HELD THAT:- the provisions of section 41(1) can be applied in respect of those liabilities which have ceased to exist in the books of accounts. From the preceding discussion, there was no dispute that these liabilities are very much appearing in the books of accounts of the assessee. Therefore, in our considered view, the provisions u/s 41(1) cannot be applied to the instant case. Regarding this, we find support and guidance from the judgment of Bhogilal Ramji Bhai Atara [2014 (2) TMI 794 - GUJARAT HIGH COURT] - decided in favour of assessee.
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