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2020 (9) TMI 234 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - claim made by the assessee company of having not incurred any expenditure to earn exempt income - HELD THAT:- As rightly contended by assessee, there was a presumption that the investment capable of yielding exempt income was made by the assessee company out of its own interest free funds and there was no utilization of interest bearing borrowed funds for making such investment so as to warrant any disallowance of interest u/s 14A. This contention for the assessee is duly supported by the decision of Hon’ble Jurisdictional High Court in the case of CIT Vs. Reliance Utilities & Power Ltd [2009 (1) TMI 4 - BOMBAY HIGH COURT] wherein it was held that if the assessee had interest free funds of its own which were more than the investment capable of earning exempt income, it could be presumed that the said investments were made from interest free funds available with the assessee and not from the interest bearing borrowed funds so as to warrant the disallowance u/s 14A . Since the interest free funds of its own funds available with the assessee company in the form of share capital and free reserves were substantially more than the corresponding investments made as noted by us, we are of the view that the disallowance made by the AO and confirmed by the Ld. CIT(A) on account of interest u/s 14A of the Act read with rule 8D(2)(ii) of the Rules is not sustainable and the same is directed to be deleted. Disallowance made u/s 14A of the Act on account of common administrative expenses by applying rule 8D(2)(iii) - Once the claim of assessee of having not incurred any common expenses in relation to the earning of exempt income is found to be not correct and the disallowance u/s 14A on account of such expenses is liable to be worked out by applying the formula given in rule 8D(2)(iii) of the Rules, the basis given therein cannot be altered or changed as sought by assessee, unless and until the basis so given in the formula is found to be patently untenable in the facts and circumstances of a particular case - No merit in this contention of the assessee and reject the same. The issue raised by the assessee relating to the disallowance u/s 14A of the Act read with rule 8D of the Rules as raised partly allowed. Education cess and secondary and high education cess - allowed as a deduction while computing the total income of the assessee - Admission of additional ground - HELD THAT:- Respectfully following the decision of the Hon’ble Jurisdictional High Court in the case of Sesa Goa Ltd. [2020 (3) TMI 347 - BOMBAY HIGH COURT] we admit the additional ground raised by the assessee and allow the same on merit by directing the Assessing Officer to allow the deduction to the assessee company while computing its total income on account of education cess and secondary and high education cess.
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