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2022 (1) TMI 789 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - Sufficiency of own funds - HELD THAT:- The Hon'ble Bombay High Court in CIT vs. Reliance Utilities and Power Ltd [2009 (1) TMI 4 - BOMBAY HIGH COURT] has held that where an assessee possessed sufficient interest free funds of its own which were generated in the course of relevant financial year, apart from substantial shareholders’ funds, presumption gets established that the investments in sister concerns were made by the assessee out of interest free funds and, therefore, no part of interest on borrowings can be disallowed on the basis that the investments were made out of interest bearing funds. In reaching this conclusion, the Hon’ble High Court relied on the judgment of the Hon’ble Supreme Court in the case of East India Pharmaceutical Works Ltd. Vs. CIT [1997 (3) TMI 5 - SUPREME COURT] - Similar view has been taken by the Hon'ble Dehi High Court in CIT vs. Tin Box Company [2002 (11) TMI 75 - DELHI HIGH COURT] holding that when the capital and interest free unsecured loan with the assessee far exceeded the interest free loan advanced to the sister concern, disallowance of part of interest out of total interest paid by the assessee to the bank was not justified. More recently, the Hon’ble Supreme Court in CIT(LTU) VS. Reliance Industries Ltd. [2019 (1) TMI 757 - SUPREME COURT] has reiterated the same view. 6. When we examine the amount of Investments in the extant case at ₹ 98.45 lakh as against the availability of Share Capital and Reserves at ₹ 58.16 crore, it is manifested that the amount of such Investments is much less than the amount of shareholders’ fund. Respectfully following the precedent, we order to delete the disallowance under Rule 8D - Decided in favour of assessee.
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