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2023 (11) TMI 387 - AT - Income TaxDisallowance u/s 14A - sufficiency of own funds - HELD THAT:- As regards to disallowance in both the years, the assessee is having more interest free funds than the investments. As regards to assessment year 2012-13, the assessee has given revised computation and already made suo-motto disallowance before CIT(A). But as regards to assessment year 2013-14 is concerned, the assessee’s interest free funds available is at Rs. 114.93 crores as against which investment giving rise to exempt income stood at Rs. 100.72 crores. Hence, for assessment year 2012-13, we direct the AO to restrict the disallowance of interest expenses under Rule 8D(2)(ii) at Rs. 51,29,547/- and in assessment year 2013-14, no disallowance should be made. As regards to value of investment under Rule 8D(2)(iii) i.e., 0.5% of average value of investment for the assessment year 2012-13, disallowance should be restricted at Rs. 8,79,583/- and for assessment year 2013-14, it should be restricted to the extent of amount already disallowed by the assessee at Rs. 36,12,589/-. Disallowance of interest claim - Claim disallowed on the ground of diversion of borrowed funds used for the purpose of non-business purposes - HELD THAT:- The assessee explained the nature of business of the assessee that includes sand mining and shipping business, which the subsidiary company is also doing. The assessee explained this fact from the copy of ledger account that the subsidiary incurred expenditure at harbor and other places on behalf of assessee company. Hence, the ld.counsel before us now stated that the assessee’s advance free loan to subsidiaries is for the purpose of business and hence, the same should have been allowed. We noted that the assessee is able to prove that the assessee’s subsidiaries namely Pradeep Shipping Pvt. Ltd., and Trimex Sands Pvt. Ltd., both are subsidiaries and engaged in the business as that of the assessee and it is called the expansion of business. Even in these subsidiaries and that of the assessee, there is common management and unity of control is there. Once this fact is there, the Revenue cannot disallow the interest expenditure because it is incurred for the purpose of business. Hence, we allow the interest and direct the AO accordingly. The appeal of the assessee is allowed. TP adjustment on account of transfer pricing relating to barite-Lumps - CIT(A) deleted the addition by observing that the TPO has proceeded to compute the margins of AE with non-AE to whom there is only a single export transaction made post increase in the price and so the CUP treated by TPO is not exact one - HELD THAT:- We noted that apart from the above difference pointed out by CIT(A) in his order that the single transaction adopted by TPO for comparing the AE and non-AE transactions for which CUP method is applied. Apart from this, we noted from the sheet that the mark up cost for transaction with AE is 40.16% as against 41.93% with non-AE. This difference is within the range of +/- 5% variations allowed under the second proviso to sub-section (2) of section 92C of the Act. Once this is a fact, we find no infirmity in the order of CIT(A) and hence, we confirm the same. This issue of Revenue’s appeal is dismissed. Disallowance u/s 40(a)(ia) - non-deduction of TDS on compensatory charges - HELD THAT:- We noted that the payments made to APMDC is clearly in the nature of compensatory and these cannot be called as interest which are contemplated in the provisions of section 194A of the Act, for the purpose of deduction of TDS. Hence, we find no infirmity in the order of CIT(A), who has rightly deleted the disallowance and we confirm the same. Accordingly, this appeal of the Revenue is dismissed.
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