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2018 (10) TMI 796 - AT - Income TaxDisallowance of provision for leave encashment - Held that:- There is no bifurcation of the closing balance in the leave wage account. Unless yearwise bifurcation is furnished by the assesseee , it is not possible to disallow the exact amount of provisions for leave wages relating to the assessment year under consideration. The Assessing Officer has to disallow the provisions of leave encashment relating to the assessment year under consideration which shall be reduced by payment made after 31/03/2008 but before filing the return of income. Hence, the issue in dispute is remitted back to the file of the Assessing Officer with a direction to the assessee to furnish the exact amount of provisions towards leave wages relating to the assessment year under consideration. Disallowance on account of interest charged on the advances given to sister concern for non-business purposes - Held that:- The main plea of the Ld. AR is that the amount was advanced to sister concerns in view of the business transactions between the assessee and the sister concerns and it cannot be considered that the assessee had advanced loans to the sister concerns free of interest. In our opinion, the assessee has to establish the commercial expediency to advance money to the sister concerns and the assessee has to furnish details of the business transactions between the assessee and the sister concerns. This exercise has not been done. With this observation, we remit this issue to the file of the Assessing Officer for fresh consideration in accordance with law after giving reasonable opportunity of hearing to the assessee. This ground of appeal of the assessee is allowed for statistical purposes. Disallowance on account of interest on borrowed capital for capital work in progress - main plea of the assessee is that the assessee is having interest free funds to make investment in capital work in progress and the assessee has not put to use any borrowed funds for making the investment in capital work in progress - Held that:- The assessee has not established the availability of interest free funds for making investment in capital work in progress. The assessee has to prove the availability of interest free funds on the day of investment in capital work in progress and the funds have to be available with the assessee at the time of making investment and not at the end of the year. Accordingly, we direct the assessee to establish the availability of interest free funds at the time of making investment in capital work in progress. Hence, with this direction, we remit this issue to the file of the Assessing Officer for fresh consideration. Disallowance u/s. 14A - Held that:- As in the case of CIT vs. Catholic Syrian Bank Ltd. & Others (2010 (10) TMI 1068 - KERALA HIGH COURT) has held that disallowance u/s. 14A is to be made despite the fact that the assessees have not maintained separate accounts for the expenditure incurred towards interest paid on funds borrowed for investment in such securities and shares as well as overheads and administrative expenses. However, we make it clear that Rule 8D(iii) is applicable though, the assessee used its own funds in investment which yielded exempted income. This is so, because there was common administrative expenses incurred by the assessee. We also make it clear that if there is no exempt income, then there cannot be any disallowance u/s. 14A r.w. Rule 8D as held by the Supreme Court in the case of Maxopp Investment Ltd. vs. CIT [2018 (3) TMI 805 - SUPREME COURT OF INDIA]. This ground of appeal of the assessee is partly allowed for statistical purposes.
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