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2019 (12) TMI 772 - AT - Income TaxDisallowance of interest expenditure u/s 14A - HELD THAT:- Reserve and surplus available with the assessee as on 31.03.2010 at ₹ 1000.63 Crores was much more than this tax-exempt investments of the assessee company. In the light of these facts, now we examine the applicability of the judgment of Hon’ble Karnataka High Court rendered in the case of CIT Vs. Microlabs [2016 (4) TMI 219 - KARNATAKA HIGH COURT] on which reliance has been placed by assessee. In this case, Hon’ble Karnataka High Court has followed the judgment rendered in the case of CIT Vs. HDFC Bank [2014 (8) TMI 119 - BOMBAY HIGH COURT] wherein it was held that when investments are made out of common pool of funds and non interest bearing funds were more than the investments in tax free securities, no disallowance of interest expenditure u/s 14A can be made. Disallowance of the net Aircraft expenditure - HELD THAT:- A categorical finding has been given by the CIT(A) in his order that the assessee satisfies both the conditions and on this basis, it was held by him that the assessee is eligible for depreciation on the Aircraft. He has further noted that the Aircraft was acquired to run it on hire and air craft charges are in fact received and, on this basis, he decided that depreciation on Aircraft of ₹ 2100,08,528/- is allowed. We find that there is no dispute that an amount of ₹ 269,80,969/- was earned by the assessee towards aircraft hire charges and the expenses claimed by the assessee of ₹ 1983.43 lakhs is after reducing the charges received by the assessee of ₹ 269.81 lakhs. Under these facts, we find no infirmity in the order of the CIT(A) as per which it was held by him that the expenses on aircraft including depreciation is allowable. Section u/s 14A disallowance - HELD THAT:- This is the main claim of the assessee before CIT(A) that the assessee is a registered NBFC and the main business of the assessee is to lend money and to invest in equity shares of various companies. It is also claimed before the CIT(A) that the assessee has earned interest income of about ₹ 41 Crores and the assessee has a share capital & reserve of ₹ 1001 Crores. Out of this capital and reserve of ₹ 1000.63 Crores, if we reduce investment in shares considered for 14A disallowance of ₹ 313.11 Crores as on 31.03.2010, then also, surplus amount of approx. ₹ 688 Crores remains to take care of share application money given by the assessee of ₹ 65.22 Crores. By following the same judgment of rendered in the case of CIT Vs. Microlabs [2016 (4) TMI 219 - KARNATAKA HIGH COURT] we hold that no disallowance is called for in respect of investment by way of share application money
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