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2020 (1) TMI 989 - AT - Income TaxAddition u/s 14A r.w. Rule 8D - assessee argued that the assessee’s own funds is more than investment - HELD THAT:- Where the interest free funds available with the assessee was sufficient to make the advance to its sister concern then such investment should be presumed to be made from interest free funds available and not out of borrowed funds and in the said circumstances disallowance of interest paid on loan taken would be justified. Thus we are of the view that the no disallowance is required in view of the provisions u/s 14A r.w. Rule 8D(2) of the Act. So far as the disallowance in view of the provisions u/s 8D(2)(3) is concerned, the AO took into consideration of 0.5% of the total value of the investment to the tune of ₹ 4,70,58,853/- which comes to the tune of ₹ 3,66,23,909/-. The assessee nowhere disallowed the expenditure to earn the exempt income. We nowhere found any illegality and infirmity while deciding the issue in pursuance of Section 14A r.w. Rule 8D(3) of the Rules. But it is also quite correct that the disallowance is not required to exceed more than the exempt income in view of the decision of Cheminvest Ltd. Vs. CIT [2015 (9) TMI 238 - DELHI HIGH COURT] and CIT Vs. Holcin India Pvt. Ltd. [2014 (9) TMI 434 - DELHI HIGH COURT] . Accordingly, we restrict the disallowance to the extent of exempt income i.e. to the tune of ₹ 94,00,147/-. Accordingly, this issue is decided in favour of the assessee against the revenue. Addition u/s 14A r.w. Rule 8D of the Rules on account of Explanaton-1 to Section 115JB - HELD THAT:- The provisions of Section 14A of the Act is confines to the nowhere provisions of Chapter IV of the Act and the said Section 14A cannot be extended and read into section 115JB falling under Chapter XII-B of the Act. Accordingly, no addition is required u/s 14A and Section 115JB of the Act, hence, we delete the addition and allowed the claim of the assessee.
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