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2023 (7) TMI 903 - AT - Income TaxAddition u/s 14A - disallowance to be triggered in respect of expenses that shall eventually result in exempt income in future years - HELD THAT:- There is no dispute to the fact that during the relevant previous year no exempt income was earned. CIT(A) has followed the judicial pronouncements wherein it held as settled proposition of law that where no exempt income is earned no disallowance u/s 14A r.w.r 8D can be made. CIT(A) relied the determination of issue in favour of assessee in assessee’s own case. Ld. AR has also drawn support from orders in assessee’s own case in similar circumstances in [2023 (2) TMI 1162 - ITAT DELHI] where Revenue’s appeal on that ground was disallowed and order of ld. CIT(A) was upheld. Bad debts u/s 36(l)(vii) or business expenditure u/s 37 - Addition in respect of the payment made by assessee company to YES Bank on account of a corporate guarantee - assessee in its Proflt & Loss Account had recorded the entry as Debts Written Off - HELD THAT:- The case of assessee is that in order to create dominant position in the retail market the joint venture was incorporated and being promoters the corporate guarantees were extended for the credit facilities received for the joint venture company. It appears that Ld. AO had fallen in error in not appreciating the fact that although, the joint venture was a separate entity it was promoted by the assessee along with his partners and they had direct interest in the sustenance and existence of that company. There is no allegation that the Joint Venture was any paper or sham transaction but the matter on record show it was a functional unit which ended into loss making. The credibility of assessee was directly on stake with the default of the joint venture company FMRIL. The dues of joint venture were paid on full settlement of the dues standing against the assessee on account of corporate guarantee. The same was certainly a business expenditure as the operations of joint venture was to expand the market of assessee with his partner of joint venture. In the instant case the expenditure was rightly held to be deductible u/s 37. The assessee incurred the expenditure to avoid any adverse effect on its reputation and avoid costs of litigation and in CIT vs. Delhi Safe Deposit Company Ltd [1982 (1) TMI 2 - SUPREME COURT] has held such payments to be a valid business exigency. There is no error in the findings of ld. CIT(A) requiring interference. Decided in favour of assessee.
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