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2018 (10) TMI 1957 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - nexus between interest expenditure and exempt income earned i.e. share of profit from partnership firms, and the investments in partnership firms are made out of own capital - case of the assessee was that no disallowance was to be made on account of interest expenditure as the amount was invested in partnership firms, not for earning share of profits which in any case was earned irrespective of the investment made - HELD THAT:- Rule of Consistency is not applicable to the Income Tax Proceedings, but consistent approach should be adopted if facts remain same. In any case factual aspects of the other years are not available except that no such disallowances u/s.14A had been made in the other years. However, in the year under consideration, AO applied provisions of section 14A and disallowed the total interest charged on the debit balance of the capital accounts. In this regard, another aspect is the total interest free funds available as per Balance Sheet were 11.62 Crore and tax free investments and plea of the assessee was that no disallowance is called for in view of the ratio laid down in the case of HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT] Applying the said principle, no disallowance is to be made under section 14A - Accordingly, ground of appeal No.1 raised by the assessee is allowed. Disallowance u/s 57(iii) - AO observed two things i.e. rate of interest on which loan was taken, was higher i.e. @ 22.8% and on advance; interest was charged by assessee @18% - in more cases, 10 out of 17 cases of borrowed loan assessee had paid interest - HELD THAT:- Assessee had charged interest on advances in 4 cases out of 18 cases. The Assessing Officer disallowed excess claim of Rs.2,00,000/- out of total interest of Rs.38,56,312/- claimed u/s.57(iii) of the Act. It was clarified by Ld. AR for the assessee that the interest paid by assessee was to the tune of Rs. Rs.45,30,821/- which was restricted to Rs.38,56,312/-; hence , there is no merit in the so-called disallowance of Rs.2,00,000/-. Since the actual claim of the assessee has been restricted, no other disallowance is, thus, warranted. Accordingly, addition of Rs.2,00,000/- is, thus, deleted. Thus, ground of appeal No. 2 raised is allowed.
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