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2016 (5) TMI 1248 - AT - Income TaxDisallowance made under section 14A r.w.r 8D - Held that:- The assessee borrowed money from its group Companies and Firms and given loans to its own group companies and firms and the investments also in its group companies only. In the balance sheet, the firm shown ₹ 69,39,16,000/- as share application money. Till 31.03.2010 no shares were allotted to the firm. In the profit and loss account, the firm has shown ₹ 95,41,875/- as interest paid to others. Similar pattern of investment in share application money and incurred huge expenditure on interest, but no shares were allotted and the firm had not taken any effort to get the shares or to take back the money given as share application money. Therefore, the Assessing Officer was of the opinion that it is a clear diversion of interest bearing funds to other group companies. The assessee would be entitled to claim deduction of interest under section 36(1)(iii) of the Act on the borrowed funds utilized for the acquisition of shares only if shares were held as stock-in-trade and that would arise only if the assessee was engaged in trading in shares. So far as the acquisition of shares was in the form of investment and the only benefit the assessee derived was the dividend income which was not assessable under the Act, we are of the opinion that the disallowance under section 14A of the Act was squarely attracted and the Assessing Officer has rightly disallowed the claim - Decided against assessee
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