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2017 (11) TMI 918 - HC - Income TaxDisallowance u/s 14A - Held that:- ITAT noticed the decision of this Court in Maxopp Investment Ltd. v. Commissioner of Income Tax, (2011 (11) TMI 267 - Delhi High Court) that Rule 8D of the Income Tax Rules does not have retrospective operation. In this case, the lower authority had ruled that the provision did have retrospective operation. No question of law, therefore, arises since the ITAT merely followed the ruling of this Court in Maxopp (supra). Treatment of interest for the sum which the assessee claimed as cost of acquisition under Section 55 - Held that:- The assessee sold off its shares to an entity in a bid to disinvest itself of the loss making entity. The two individuals to whom the sum of ₹ 12,25,000/- had paid had assisted the assessee in the disinvestment move. The AO - later the CIT (A) - disallowed these amounts holding that the nature of services rendered by such individuals was not clear and the rationale in the expenditure too was not supported by any documentary evidence. Given that the disinvestment itself is not doubted as is evident from the matters reported by the assessee which are part of the record, the expenses claimed are neither disproportionate nor of the kind that facially require proof as was sought by the authorities below. Consequently, no question of law arises. As far as the capitalization of the interest in the hands of the assessee in the sum of ₹ 2,34,05,003/- is concerned, we notice that the CIT (A) had reversed the AO’s order after noting the decision of this Court in CIT v. Mithlesh Kumari (1973 (2) TMI 11 - DELHI High Court) and a later decision of the Madras High Court - CIT v. Trishul Investments Ltd.[2007 (7) TMI 252 - MADRAS HIGH COURT]. In those decisions, it was held that the interest paid subsequent to the date of the transfer in respect of the money borrowed earlier to purchase the capital asset is also part of the cost of capital asset. The CIT (A) also took note of the reasoning of the Supreme Court in Challapalli Sugar Ltd. v. CIT, (1974 (10) TMI 3 - SUPREME Court).
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