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2019 (7) TMI 80 - ITAT PUNEDisallowance u/s.36(1)(iii) - borrowed amount was invested in shares of a associate company - evidences from where it can be found out that Investments out of borrowed funds has or will generate this much of income - HELD THAT:- When all the details of investments of shares and working of interest paid has been provided to the Department, asking for any other evidences relating to what income will generate to the assessee, at this stage, first of all, it is not the requirement of Section 36(1)(iii) and secondly, at this stage, it is just asking for some hypothetical evidences. The very fact that funds borrowed were invested in shares of an associate company itself demonstrates the business strategy of the assessee company. As find in the case of Hero Cycles P. Ltd. Vs. CIT [2015 (11) TMI 1314 - SUPREME COURT] has held that where loans were advanced by the assessee to its various associate concerns as a part of business strategy, interest on such loans was allowable deduction u/s.36(1)(iii). Extending this proposition to the facts of the present case, investments in shares of the associate concerns by the assessee is part of business strategy and therefore, interest on such loans are allowable deduction u/s.36(1)(iii) In view of the above examination of facts and legal propositions, we hold that the investments made by the assessee in M/s. Kimplas Piping Systems Ltd. were wholly and exclusively for the purpose of business and therefore, no disallowance u/s.36(1)(iii) of the Act could be made in the present case. Hence, we set aside the order of the Ld. CIT(A) on this issue and direct the AO to delete the addition - Decided in favour of assessee. Disallowance u/s 14A - non recording of satisfaction by AO on judicious and objective application of mind. HELD THAT:- We find that in the case of Godrej & Boyce Manufacturing Co. Ltd. [2010 (8) TMI 77 - BOMBAY HIGH COURT] , it has been held that it is a mandatory requirement of the law u/s.14A that the AO has to scrutinize the claim of the assessee before making any disallowance. However, in the instant case, without looking into these facts, the disallowance was made. The Assessing Officer has not recorded satisfaction on judicious and objective application of mind. Also in the case of CIT Vs. Delite Industries Ltd. [2009 (2) TMI 498 - BOMBAY HIGH COURT] has held that if the investments from whom no exempt income is received then there is no question of making any disallowance u/s.14A of the Act on these investments. Referring to facts of the present case before us, wherein no exempt income has been earned by the assessee, in such case, no disallowance can be called for u/s.14A - Decided in favour of assessee.
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