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2015 (6) TMI 1207 - AT - Income TaxInterest expenditure incurred allowable - Addition u/s 36(1)(iii) or u/s 14A - HELD THAT:- Assessee company is engaged in the business of finance and investment in equity shares. The borrowed capital was used for acquiring the equity shares of the subsidiary to have controlling interest. The proposition of law laid down in the case of “Phil Corpn. Ltd.” [2011 (6) TMI 912 - BOMBAY HIGH COURT] is squarely applicable to the case of the assessee. In the case of “Eicher Goodearth Ltd. vs. CIT” [2015 (5) TMI 685 - DELHI HIGH COURT] has held that if the expenditure is incurred for the purpose of promotion of business more specifically to retain control or as part of the strategic investment of the assessee company, such expenses by way of interest out go would have to be treated as allowable under section 36(1)(iii) . The above decision of the Hon’ble Delhi High Court is also squarely applicable to the facts of the case of the assessee. Since the interest expenditure incurred by the assessee is allowable under section 36(1)(iii) as business expenses, there is no question of disallowance of the same u/s 14A of the Act on account of investments made in relation to earning of exempt income. The facts on the file clearly reveal that the investment in the shares of the subsidiary company was not made for the purpose of earning of any exempt income rather it was made for gaining controlling interest over the subsidiary which as per the law laid down in the case of “CIT, Panaji, Goa vs. Phil Corpn. Ltd.” [2011 (6) TMI 912 - BOMBAY HIGH COURT] and “Eicher Goodearth Ltd. vs. CIT” [2015 (5) TMI 685 - DELHI HIGH COURT] is held to be for the purpose of promotion of the business of the assessee. Even it is also an admitted fact that the assessee during the year had not earned any exempt income. The AO had made the disallowance under section 14A relying upon the decision of the special bench of the Tribunal in the case of “Chem. Investments vs. ITO” [2009 (8) TMI 126 - ITAT DELHI-B]. However, we find that the said special bench decision of the Tribunal has been overruled by the Hon’ble Delhi High Court in the case of “Chem. Investments [2015 (9) TMI 238 - DELHI HIGH COURT] wherein the Hon’ble Delhi High Court has held that the section 14A will not apply if no exempt income is received or receivable during the relevant previous year. Even otherwise, no disallowance is warranted under section 14A of the Act also, in the case of the assessee. Neither any interest disallowance is warranted in this case under section 36(1)(iii) of the Act nor under section 14A of the Act. Appeal of the assessee is hereby allowed.
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