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2016 (6) TMI 737 - AT - Income TaxDisallowance u/s 14A - Held that:- If there are interest free funds available a presumption would arise that investment would be out of interest free funds available. This view has also been endorsed by the Bombay High Court in a latest judgment in the case of HDFC Bank Ltd. Vs. DCIT (2016 (3) TMI 755 - BOMBAY HIGH COURT ), which was rendered in the context of disallowance under section 14A of the Act. Interestingly, in this case the High Court has reprimanded the Tribunal in not following an earlier judgment of the Court in the case of CIT Vs. HDFC Bank Ltd. (2014 (8) TMI 119 - BOMBAY HIGH COURT ), which in turn relying on the judgment of Reliance Utilities & Power Ltd. (2009 (1) TMI 4 - BOMBAY HIGH COURT ), has held that owned funds being more than investments, it is to be presumed that these were made out of owned funds. Ironically, all the Landmark judgments relied on this case do not relate to the issue of section 14A of the Act.In view of the above, the Assessing Officer is directed to delete the addition made under section 14A of the Act. - Decided in favour of assessee Capitalization of interest towards machinery under installation account - Held that:- There were certain machinery & building under construction during the year. The assessee had capitalized certain interest on acquisition of the same claiming that to an extent the amount was borrowed for acquisition of these. We are of the considered view that in case the assessee has given a plausible explanation with regard to the extent of interest being capitalized by it suo-moto, the Assessing Officer cannot make further addition without bringing on record any material to show the nexus between the amount borrowed and utilized for acquisition or construction of such asset. Nowhere in his order the Assessing Officer had been able to substantiate that the amount of interest capitalized by the assessee itself is not correct. Further, the explanation given by the assessee that it has huge owned funds to acquire such assets also has a bearing on the issue. In view of this, we direct the Assessing Officer to delete the disallowance.- Decided in favour of assessee Disallowance of interest on advances given to two parties - Held that:- No evidence to show the business expediency for these advances could be filed. However, we must also add that from the reading of the Balance Sheet of the assessee, it is quite clear that the assessee possesses huge own funds, therefore, relying on the proposition laid down by the Jurisdictional Punjab & Haryana High Court in the case of Bright Enterprises Pvt. Ltd. (2015 (11) TMI 342 - PUNJAB & HARYANA HIGH COURT), we are inclined to hold that presuming in such fact situation that the money has been lent out of owned funds, no disallowance of interest is called for - Decided in favour of assessee
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