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2022 (9) TMI 1139 - AT - Income TaxDisallowance u/s. 14A r.w.r. 8D - upward adjustment u/s. 115JB of disallowance under Rule 8D(ii) and 8D(iii) - Whether interest cost includes finance charges? - suo-moto disallowance u/s. 14A by assessee - Contention of the ld. AR that as per definition of interest u/s. 2(28A) of the Act, interest means interest payable in any manner in respect of any money borrowed and includes any service fees or other charges in respect of the money borrowed - HELD THAT:- Commissioner has already held that disallowance to that extent needs to be adjusted for u/s. 115JB of the Act and consequently directed to Assessing Officer to recompute the disallowance u/s. 14A, hence no interference is warranted. In view of the judgments of Joint Investments Pvt. Ltd. [2015 (3) TMI 155 - DELHI HIGH COURT] and Caraf Builders & Constructions (P) Ltd. [2018 (12) TMI 410 - DELHI HIGH COURT]and in order to cutshort the litigation and for just decision of the case, we are allowing the alternative claim of the Assessee to the effects that disallowance, if at all, cannot exceed exempt income earned during the relevant assessment year and therefore, directing the Assessing Officer to restrict the disallowance u/s. 14A of the Act, only to the extent of the exempt income earned during the year. Adjustment on account of subsidy(ies) received to the tune to the books profit of the Assessee computed u/s 11JB - HELD THAT:- We find that in the instant case the Assessee treated the Subsidies/Incentives referred to above as “capital in nature” and directly incorporated to its reserves, without incorporating in its profit and loss account and inter-alia claimed that such subsidies received were credited to the capital reserves in accordance with the applicable accounting principles/standards as the accounts of the Assessee are correct being duly audited. We observe that both the authorities below without going into the treatment adopted by the Assessee, and without determining/testing the purpose of scheme of the subsidies/incentives and the status of the said subsidies whether the same are capital or revenue in nature as mandated in the case of Sahney Steel and Press works [1997 (9) TMI 3 - SUPREME COURT] decided the tax liability of the Assessee u/s 115JB of the Act. In our considered view, the authorities below should have first determined as to whether Subsidies/Incentives received by the Assessee are ‘revenue’ or ‘capital’ in nature and after determination of the same, should have decided the tax liability u/s 115JB of the Act, but not otherwise. Hence considering the peculiar facts and circumstances, we deem it appropriate to set aside the decisions of the authorities below on this issue and to remit the said issue to the file of the Assessing officer for decision afresh, by taking into consideration the observations made above. Order accordingly.
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