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2018 (8) TMI 1982 - AT - Income TaxDisallowance of expenses of interest being difference in the rate of interest paid on borrowings and interest charged on short term lending to subsidiary companies - According to AO, the rate of interest charged is lower than the interest paid to layman brothers and hence, according to him, the differential interest charged as expense is to be disallowed and added to the returned income of the assessee - HELD THAT:- In this year interest charged from subsidiary is at the rate of 6% as against 9% in earlier years and also received funds from Lehman Brothers at the rate of 12 % as against at the rate of 13.5% in earlier year. When the above order was confronted to the learned CIT DR, Shri R Manjunatha Swamy, he only relied on the assessment order. After hearing both the sides and going through the orders of the lower authorities also the Tribunal order in earlier years, we respectively following the same, confirm the order of CIT(A) deleting the disallowance of interest. Accordingly, this issue of Revenue’s appeal. Disallowance of expenses relatable to exempt income by invoking the provisions of section 14A read with Rule 8D(2)(ii) of the Rules i.e. disallowance of interest expenses - disallowance of exempt income under section 14A of the Act read with Rule 8D(2) while computing the income under section 115JB - HELD THAT:- After hearing both the sides, and going through the facts and circumstances of the case and the decision of Tribunals in assessee’s own case for AY 2008-09, we find that the facts are exactly identical and respectfully following the same, we confirm the order of CIT(A) deleting the addition. The issue is covered in favour of assessee and against Revenue by the decision of Special Bench of this Tribunal in the case of ACIT vs. Vireet Investments (P.) Ltd. [2017 (6) TMI 1124 - ITAT DELHI] wherein the Tribunal has clearly held that no disallowance under section 14A of the Act r.w.r 8D of the Rules can be made while computing book profit under section 115JB of the Act. The learned Sr. DR could not controvert the above proposition. Accordingly, we are of the view that this issue is covered by the special bench decision of this Tribunal in the case of Vireet Investments (P.) Ltd. (supra). Respectfully following the same, we delete the disallowance and allow this issue of assessee’s appeal. This issue of Revenue’s appeal is dismissed and that CO of the assessee is allowed. Disallowance u/s 14A read with Rule 8D(2)(iii) - investments on which assessee has actually earned exempt income - HELD THAT:- Assessee filed computation of disallowance of exempt income relating to parties giving exempt income and that comes to 0.5% on average value of investment under Rule 8D(2)(iii) of the Rules at ₹ 13,35,500/-. After going through the Tribunals order, we are in agreement with the findings of the Tribunal of earlier year and are of the view that the AO has to recomputed the disallowance under Rule 8D(2)(iii) after excluding the investment on which no exempt income has been earned by the assessee. The assessee will file computation before AO and AO after verification will decide the claim. This issue of the assessee’s appeal is set aside and allowed for the statistical purposes.
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