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2019 (11) TMI 640 - AT - Income TaxAddition u/s 14A - interest expenditure disallowable u/s.36(1)(iii) or u/s.57(iii) - CIT(A) deleted the addition - whether the funds borrowed by the assessee were utilized for the purpose of investment and as such the disallowance of interest on funds used for investments was merited as per the provision of section 14A? - HELD THAT:- Assessing Officer has finally made the addition u/s.14A read with Rule 8D. It is an admitted fact that no dividend income has been earned by the assessee neither in this year nor in the subsequent years. Thus, in view of the judgment of Hon’ble Jurisdictional High Court in the case of Cheminvest Ltd. vs. CIT [2015 (9) TMI 238 - DELHI HIGH COURT] no disallowance u/s.14A can be made. Moreover, the Tribunal in assessee’s own case has held that the ‘interest income’ and ‘interest expenditure’ were directly linked to the business of the assessee Thus, when there is a direct nexus between the direct earning and direct investment, no disallowance u/s.36(1)(iii) can be made. In so far as Section 57(iii) is concerned, admittedly it is not in dispute that the ‘interest expenditure’ has been assessed as ‘business income’, therefore, no disallowance u/s.57(iii) can be made.
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