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2021 (10) TMI 1093 - AT - Income TaxDisallowance of certain expenses specifically incurred for the project and also interest disallowance - assessee submitted as alleged disallowance of interest and administration expenditure pertains to projects under construction and the disallowance is rightly made and also made a request that suitable direction should be given to the AO that the year in which these projects can be completed, the assessee should be entitled to claim the alleged disallowance of expenses - HELD THAT:- Since the assessee is following percentage completion method, the alleged expenses and interest expenditure which were having direct nexus with the projects undergoing during the year cannot be claimed as revenue expenditure for the year under appeal and, therefore, should form part of the work-in-progress and the assessee shall be eligible to claim the amount as an expenditure when the projects with which they are connected are completed and assessee starts selling the units of the project.- Decided against assessee. Disallowance u/s 14A r.w.r. 8D - HELD THAT:- It is a settled judicial precedence that disallowance of interest expenditure u/s 14A of the Act is not called for if the assessee has sufficient capital and reserve and surplus that interest free funds available are in excess of the investments held during the year. Since the interest free funds available with the assessee are in excess of the investment in equity shares at the close of the year and there being no specific finding by the AO about the nexus of the interest bearing funds having been applied for investment in equity shares, we find no justification in the finding of the ld. CIT(A) confirming the interest disallowance u/s 14A of the Act made by the AO. We accordingly set aside the finding of the ld. CIT(A) and allow the ground no. 3 raised by the assessee.
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