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2020 (3) TMI 1223 - AT - Income TaxDeduction u/s.80IAB(4)(iii) - Deduction under the said provision in respect of income derived from a SEZ project known as Millennium Towers - HELD THAT:- AO considers income from Millennium project as Business income then he should allow all the expenses claimed by the Assessee and therefore the income from Millennium project arrived at by the AO at ₹ 1,17,35,191 was not proper. By reason of this conclusion, there would be only loss from the project Millennium and therefore there is no occasion to allow deduction u/s.80IAB(4)(iii). There was also a disallowance of expenditure u/s.14A of the Act. The disallowance u/s.14A of the Act was sustained by the CIT(A) at a sum of ₹ 65,65,245/-. The CIT(A) in para 6.10 of his order observed that if the profit of the Assessee increases after the disallowance of expenses u/s.14A of the Act, the Assessee would be eligible for deduction u/s.80IAB(4)(iii)/80IA of the Act on such enhanced profit. There is no bifurcation of the sum of ₹ 65,65,245 between the Millennium Towers project eligible for deduction u/s.80IAB(4)(iii) of the Act and the other project on which the Assessee claimed deduction u/s.80IA of the Act. The CIT(A) however in paragraph-7 of his order observed that the Assessee has negative income after setting off loss of earlier years business loss and hence he did not allow any deduction u/s.80IAB(4)(iii). - Therefore the grounds raised by the revenue in this regard are without any basis and does not arise out of the order of the CIT(A). - Decided against the revenue. Disallowance of expenses u/s.14A r.w.r. 8D - HELD THAT:- There can be no dispute on the availability of own funds more than the investments that are likely to yield tax free income. This finding of the CIT(A) has not been shown to be erroneous except a submission that own funds and borrowed funds come from a common pool of funds. The law by now is well-settled that if available interest-free funds are much more than investments in dividend yielding shares, then there can be no disallowance under rule 8D(2)(ii) of the Act. In the case of CIT Vs. HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT] it was held where assessee's own funds and other non-interest bearing funds were more than investment in tax free securities, no disallowance of part of interest payments under section 14A of the Act can be made. In light of the above factual and legal position, we are of the view that disallowance of interest under rule 8D(2)(ii) cannot be sustained and was rightly deleted by the CIT(A). Besides the above the interest expenditure claimed by the Assessee as deduction were all in respect of borrowings which by its very nature was not capable of being used by the Assessee for the purpose other than business purpose of the Assessee and not for making investment. We find no grounds to interfere with the order of the CIT(A) and dismiss the relevant grounds of appeal of the revenue.
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