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2020 (3) TMI 429 - AT - Income TaxDisallowance u/s 14A - whether any expenditure incurred in earning income which does not form part of the total income shall be disallowed in computing total income? - HELD THAT:- Bangalore Bench of ITAT in the case of M/s UB Infrastructure Projects Ltd., Vs. DCIT. [2017 (12) TMI 1749 - ITAT BANGALORE] this Tribunal took the view that there can be no disallowance of expenses u/s 14A of the Act, if there is no exempt income earned during the relevant previous year as followed in Cheminvest Ltd. v. CIT [2015 (9) TMI 238 - DELHI HIGH COURT] - We are of the view that the disallowance of expenditure u/s 14A of the Act cannot be sustained and the same is directed to be deleted. Disallowance u/s. 14A in the present case should be restricted to the exempt income earned by the assessee. Disallowance of interest expenses u/s. 36(1)(iii) - HELD THAT:- What is Assessee’s interest in the project, whether Assessee intends to develop the project and why the payment is routed through Mysore Logistics Pvt.Ltd., and what is the connection between the project and Mysore Logistics Pvt.Ltd., are not explained. Therefore the business purpose, in our view was rightly not accepted by the CIT(A). As far as Primus Engineering Solutions Pvt. Ltd., is concerned, it is claimed that interest was charged on this loan and the CIT(A) has directed the AO to verify this aspect and allow relief. Hence, we need not examine the business purpose of this loan, as the loan is not interest free loan. What is now left for consideration is interest free loan to G.Susheela who is a director of the Assessee - The stand taken by the Assessee has not been established with credible evidence. There is no agreement between G.Susheela and the Assessee to substantiate the claim of the Assessee. There is no material brought on record to show any obligation on the part of G.Susheela to part with her rights over any property that she might acquire either as owner as agreement holder in favour of the Assessee. In such circumstances, the plea of the Assessee deserves to be rejected and was rightly rejected by the CIT(A).
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