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2018 (12) TMI 1654 - AT - Income TaxDisallowance u/s 14A r.w.r.8D - assessee in the case on hand has earned dividend income which was claimed as exempt under section 10(34) however, the assessee has not made any disallowance of the expenses incurred in relation to such dividend income - HELD THAT:- As regards the direct expenses we note that the assessee has not made any argument either before the AO or the Ld. CIT(A). We also note that the learned counsel for the assessee has not argued the disallowance of the direct expense made by the authorities below before us. Therefore we do not find any defect in the order of authorities below. Hence we confirm the disallowance of the direct expenses As regards the interest expenses we note that the own fund of the assessee exceeds the amount of investment as evident from the financial statement of the assessee . It is settled Law that there cannot be any disallowance on account of interest expenses if the own fund of the assessee exceeds the investment. 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] and HDFC BANK LTD. [2014 (8) TMI 119 - BOMBAY HIGH COURT] - thus no disallowance of interest expense claimed by the assessee can be made on account of investments Administrative expenses we note that there was no submission made by the assessee either before the AO or Ld. CIT(A). CIT(A) has given the direction to the AO to exclude those investments while working out the disallowance under rule 8D r.w.s. 14A in respect of which income is not chargeable to tax. Thus the investments which are not capable of generating exempted income will not be considered for the purpose of disallowance under the provisions of section 14A r.w.r 8D of the income tax rule. Whether all the investments which are capable of generating the exempted income will be considered for the purpose of disallowances under section 14A r.w.r 8D? - HELD THAT:- There was no disallowance made by the assessee as per the provisions of rule 8D r.w. section 14A. Therefore there was no option available with the AO to make the disallowance as per the provisions of section 14A of the Act. Disallowance on account of the amount invested in Capital work-in-progress - HELD THAT:- We note that the own interest-free fund available with the assessee exceeds the amount of investment made in the capital work-in-progress. Therefore, we can presume that the assessee in such capital work-in-progress invested the own fund. 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]. We hold that no disallowance of interest expense claimed by the assessee can be made on account of fund invested in the capital work in progress as discussed above. Hence, we reverse the order of the authorities below. The AO is directed to delete the addition made by him Disallowance on account of interest expenses on the borrowed fund invested in the flat at Mumbai - HELD THAT:- We note that the own interest-free fund available with the assessee exceeds the amount of investment made in the Flat located at Mumbai. Therefore, we can presume that the assessee in such flat invested the own fund. 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] and HDFC BANK LTD. [2014 (8) TMI 119 - BOMBAY HIGH COURT]. we hold that no disallowance of interest expense claimed by the assessee can be made on account of investments in the flat as discussed above. Hence, we reverse the order of the authorities below. The AO is directed to delete the addition made by him. Thus, the ground raised by the Assessee is allowed.
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