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2021 (1) TMI 468 - AT - Income TaxDisallowance u/s.14A - AO noticed that the assessee has earned dividend income but assessee has not disallowed any expenses for earning the exempt income u/s. 14A - HELD THAT:- Since the assessee had sufficient own interest free funds no disallowance should have been made considering the interest. In so far as the disallowance of administrative expenses is concerned we find that the CIT(A) has restricted disallowance to the extent of the exempt income relying upon the decision of JOINT INVESTMENTS PVT LTD [2015 (3) TMI 155 - DELHI HIGH COURT]. We are of the opinion that such disallowance is reasonable and need no interference. Ground No.1 is accordingly dismissed. Disallowance of interest u/s. 36 (1) (iii) - AO noticed that the assessee has given interest free advances to its sister concern and interest incurred by the assessee on the loans borrowed by it need to be proportionately disallowed - HELD THAT:- On the first day of the accounting year the loans and advances were ₹ 15.70 crores and in the last day of the accounting year loans and advances have been reduced to ₹ 9.55 crores. This means that no fresh loans / advances were given during the year under consideration. Further the interest free funds available with the assessee is around ₹ 38 crores, therefore, it can be safely concluded that the loans and advances given to the sister concern have been given out of own interest free funds. On these facts no disallowance need to be made, we accordingly direct the AO to delete the addition.
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