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2019 (3) TMI 2086 - AT - Income TaxDisallowance u/s 14A read with rule 8D of the Income Tax Rules - HELD THAT - Considering the quantum of investment made the amount of divided earned by the assessee from its own subsidiary as well from outside / other companies in our view a total disallowance of Rs. 5 lacs will be justified in this case on account of administrative expenses. However since the assessee itself has suo motu made disallowance of Rs. 2 lacs the assessee will be given the benefit of the same. Disallowance of interest on notional basis under the provisions of section 36(i)(iii) of the Act - HELD THAT - As in the light of the decision of Reliance Industries Ltd. 2019 (1) TMI 757 - SUPREME COURT no disallowance is attracted under this head as the assessee has demonstrated that it had sufficient own funds to meet the investments / advances given etc. This issue is accordingly decided in favour of the assessee. Nature of receipt - premium paid on redemption of Foreign Currency Convertible Bonds (FCCB) - revenue or capital receipt - HELD THAT - Assessee has invited our attention to the decision of the Tribunal in the own case of the assessee M/s Vardhman Textiles Ltd 2018 (12) TMI 1623 - ITAT CHANDIGARH wherein on identical facts the Tribunal after considering the relevant facts has held that the said expenditure is to be treated as Revenue expenditure in the year of payment. Disallowance u/s 40(a)(ia) - non-deduction of tax at source on the amount of commission paid to non-resident agents against export sales - HELD THAT - After going through the assessment orders we find that the Assessing officer has not disputed that the aforesaid payments were made to foreign agents who were not taxable in India. Since income if any received or accrued to foreign agents was not taxable in India hence as per the settlement law the expenditure cannot be disallowed for non-deduction of TDS on such payments. No justification on the part of the lower authorities in disallowing the expenditure under this head. This issue is accordingly decided in favour of the assessee and the disallowance made if any on the issue for non-deduction of TDS is ordered to be set aside/deleted. Treating the interest received - Income from other sources OR Business and Profession - HELD THAT - As undisputed fact on the file that the aforesaid amount of interest has not been received by the assessee during the course of business i.e. to say that from customers or suppliers etc. hence the same in our view cannot be treated as income from business or profession . However there is force in the alternative contention of assessee that there should be netting of the interest expenditure and the interest income received from other parties / banks etc. We accordingly direct the AO to allow the expenditure incurred by the assessee for earning of the interest income i.e. if assessee is able to bring nexus between the expenditure incurred and the interest income earned net of the income will be taxable under the head income from other sources . This ground is accordingly partly allowed in favour of the assessee. Allowance of deduction u/s 80IB / 80IC - HELD THAT - We direct the AO to verify whether these are independent receipts if found so the AO is directed to allow the income from sundry balance written back commission / discount received and exchange rate fluctuation as the same is related to the business activity of the assessee however the income from rent is not allowable to be eligible u/s 80IC / 80IB of the Act. So far as the Misc. receipts is concerned since we do not have exact details of such Misc. receipts hence assessee has submitted that he does not press the issue relating to Misc. Receipts under the head Misc. Income . So far as the prior period income is concerned the same is also not pressed. Ground is partly allowed. Allowance of sales tax subsidy is a capital receipt. Treating the line/bay charges as capital receipt instead of Revenue receipt - This issue is relating to sales tax subsidy received from M.P. government. This issue is identical to that has been taken in ground No.12 of the appeal. Accordingly the sales tax subsidy in respect of M.P. Unit is also ordered to be treated as capital receipt. Excess expenditure claimed by the assessee on power generation - The assessee has explained the reasons for excess consumption of power etc. during the year in its manufacturing activity. In view of this we do not find any reason to interfere with the findings of the CIT(A) on this issue. This ground of the Revenue is accordingly dismissed.
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