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2020 (6) TMI 193 - AT - Income TaxDisallowance of interest expenses paid to the related parties being excessive - AO during the assessment proceedings found that the assessee had paid interest on the borrowed fund at different rates ranging from 12% to 24% p.a. thus worked out the reasonable rate of interest being 18% on the fund borrowed from the relatives - HELD THAT:- There cannot be any disallowance for the year under consideration on the money borrowed in the earlier year. As relying on SRIDEV ENTERPRISES [1991 (1) TMI 52 - KARNATAKA HIGH COURT]we hold that there cannot be any disallowance on account of interest expenses being excessive paid to the related parties under section 40A of the Act. Hence we set aside the finding of the learned CIT (A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed. Disallowance u/s 14A r.w.r 8D - HELD THAT:- It is the settled laws that there cannot be any disallowance of interest expenses if the own fund of the assessee exceeds the amount of investments. Admittedly the own fund of the assessee exceeds the amount of investment in the present case. In this connection, we find support and guidance from the judgment in the case of Reliance Utilities [2009 (1) TMI 4 - BOMBAY HIGH COURT] wherein held if there are funds available both interest-free and overdraft and/or loans taken, then a presumption would arise that investments would be out of the interest-free fund generated or available with the company, if the interest-free funds were sufficient to meet the investments - Thus we hold that no disallowance of interest expense claimed by the assessee can be made on account of investments as discussed above under the provision of section 14A r.w.r. 8D - Decided in favour of assessee. Addition of administrative expenses - HELD THAT:- AR at the time of hearing has not advanced any argument about the disallowance made by the authorities below. Accordingly we confirm the disallowance for the administrative expenses made by the authorities below. Hence the ground of appeal of the assessee is partly allowed. MAT computation - Working out the book profit under the provisions of section 115 JB for disallowance u/s 14A - HELD THAT:- We hold that the disallowances made under the provisions of Sec. 14A r.w.r. 8D of the IT Rules, cannot be applied to the provision of Sec. 115JB of the Act as per the direction of the Hon'ble Calcutta High Court in the case of CIT Vs. Jayshree Tea Industries Ltd. [2014 (11) TMI 1169 - CALCUTTA HIGH COURT] We note that there is no mechanism/ manner given under the clause (f) to Explanation-1 of Sec. 115JB of the Act to workout/ determine the expenses with respect to the exempted income. Therefore in the given facts &circumstances, we feel that adhoc disallowance will serve the justice to both the Revenue and assessee to avoid the multiplicity of the proceedings and unnecessary litigation. Thus we direct the AO to make the disallowance of 1% of the exempted income under the clause (f) to Explanation-1 of Sec. 115JB of the Act, subject to the condition that the disallowance shall not exceed the amount of disallowance determined by the authorities below under the provisions of section 14A r.w.r. 8D of Income Tax Rules. Hence, the ground of appeal of the assessee is partly allowed. Delay in deposit made to the employees Provident fund and ESIC - Addition on account of delay in deposit the employee’s contribution under section 36(1)(va) - HELD THAT:- As decided in GUJARAT STATE ROAD TRANSPORT CORPORATION [2014 (1) TMI 502 - GUJARAT HIGH COURT] such sums were not credited by the respective assessee to the employees 'accounts in the relevant fund or funds on or before the due date as per the Explanation to section 36(1)(va) of the Act i.e. date by which the concerned assessee was required as an employer to credit employees' contribution to the employees account in the Provident Fund under the Provident Fund Act and/or in the ESI Fund under the ESI Act. - Decided against assessee. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT:- Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited [2020 (5) TMI 359 - ITAT MUMBAI]
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