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2016 (8) TMI 1569 - AT - Income TaxExemption u/s 14A r.w.r. 8D - interest paid by the assessee on the borrowed funds - HELD THAT:- If there is any direct nexus with the borrowed funds then the interest paid by the assessee on the borrowed funds has to be disallowed in view of Rule 8D(2)(i) of the Act. If the expenditure/interest is not relatable to the income which was exempted from taxation, then disallowance has to be computed under sub-clause(2)(ii) of Rule 8D. It is also necessary to examine the details of the investment made from the first day of the financial year and the last day of the financial year as found in the Balance Sheet for the purpose of computing the aggregate expenditure under third limb of Rule 8D(2). These exercises were not done either by the Assessing Officer or the CIT(A). The investment made in Shriram Transport Finance Company Ltd and Shriram City Union Finance Ltd. was claimed to be investment in the subsidiary companies. It is not known how Shriram Transport Finance Company Ltd and Shriram City Union Finance Ltd. are sister concerns of the assessee-company. Merely because some of the Directors are common in both the companies, that cannot be a reason to hold that the companies in which the assessee invested are subsidiary/holding companies. Tribunal is of the considered opinion that the shareholding pattern of the assessee-company and the companies in which investments were made has to be examined to decide whether the investment was made by the assessee in the subsidiary/holding companies. These facts were not apparently examined by the lower authorities. Moreover, the availability of liquid funds with the assessee on the date of the investment also needs to be examined. Since these factual aspects are not examined by any of the lower authorities, this Tribunal is of the considered opinion that the matter needs to be reexamined. Accordingly, the orders of the lower authorities are set aside and the entire disallowance made by the Assessing Officer u/s 14A r.w. Rule 8D is remitted back to the file of the Assessing Officer. TDS u/s 194C - Addition u/s 40(a)(ia) - Proof of recipient/deductee disclosing the receipt in the return of income and paid taxes thereon - HELD THAT:- Under the scheme of the Income-tax Act, 1961, the assessee has to deduct tax only at the time of payment or giving credit, therefore, the amount which was already paid or given credit and remains ‘payable’ is also subjected to disallowance u/s 40(a)(ia) of the Act. Therefore, we are unable to uphold the order of the CIT(A) on this issue. Accordingly, the order of the CIT(A) is set aside and that of the Assessing Officer is restored. Now the ld. Counsel submits that the recipient/deductee admitted the income and paid the taxes. This fact is not verified by any of the lower authorities. This Tribunal is of the considered opinion that if the recipient/deductee disclosed the receipt in the return of income and paid taxes, there is no need for further disallowance. However, the matter needs to be verified by the Assessing Officer. Accordingly, the orders of the lower authorities are set aside and the issue of disallowance u/s 40(a)(ia) of the Act is remitted back to the file of the Assessing Officer. The Assessing Officer shall verify whether the deductee/recipient of the amounts disclosed the same in their return of income and paid the taxes. The Assessing Officer thereafter decide the same in accordance with law after giving a reasonable opportunity to the assessee.
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