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2015 (9) TMI 544 - ITAT HYDERABADDisallowance u/s 14A - Held that:- The issue in dispute is squarely covered by the decision of the ITAT in assessee’s own case for AY 2009-10 [2014 (11) TMI 229 - ITAT HYDERABAD ] wherein the Tribunal sustained the disallowance under Rule 8D(2)(ii) by observing as so far as disallowance @ 0.5% on the average value of investment under rule 8D(2)(III) is concerned, we are of the view that the same is in order. Reading of the provision contained u/s 14A and more specifically sub-section(3) of section 14A read with rule 8D(2)(iii) makes it clear, even where the assessee claims that he has not incurred any expenditure for earning exempt income, disallowance of expenditure deemed to have been incurred has to be worked out @ 0.5% on the average value of investments. As the AO has correctly computed disallowance in terms with rule 8D(2)(iii), the same deserves to be upheld. Accordingly, we sustain the addition made u/s 14A by the AO. - Decided against assessee. ESI contribution from the employees - disallowance u/s 36(1)(va) as amount deposited beyond prescribed due date - Held that:- As observed that different high courts while considering identical nature of dispute have held that employees contribution to PF and ESI, if, have been remitted to govt. account within the due date of filing of return u/s 139(1), the same will be an allowable deduction. See CIT Vs. Nipso Polyfabriks Ltd.[2012 (11) TMI 592 - HIMACHAL PRADESH HIGH COURT] and CIT Vs. Ghatge Patil Transport Ltd. [2014 (10) TMI 402 - BOMBAY HIGH COURT] - Decided in favour of assessee. Disallowance of interest expenditure u/s 36(1)(iii) - CIT(A) delted the addition - Held that:- It is well settled principle of law that unless a nexus is established between borrowed funds and the investment made for earning exempt income, no disallowance could be made on notional basis. In the present case, there is no dispute to the fact that borrowed funds were for specific purpose. It is not the case of the department that assessee during the year has not lent any money to its customers. That being the case, it cannot be said that borrowed funds were utilized for non-business purpose. Unless the department establishes a nexus between investment made and the borrowal of funds, no disallowance of interest expenditure on presumptive basis can be made. Further, it is not disputed that assessee was having enough surplus and reserves to make the investment in mutual funds. The Hon’ble Bombay High Court in case of CIT Vs. Reliance Utilities and Power Ltd. (2009 (1) TMI 4 - HIGH COURT BOMBAY) has held that if assessee is having own funds as well as borrowed funds, the presumption would be own funds have been utilized for making investment. In view of the aforesaid, since the revenue has failed to establish that borrowed funds were utilized for making investments, no disallowance of interest expenditure can be made notionally.- Decided in favour of assessee.
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