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2020 (12) TMI 117 - ITAT BANGALOREDisallowance of interest expenditure u/s 36(1)(iii) - assessee has given interest free loans to related concerns - assessee has contended that the interest free funds available with it has been used to make interest free loans to the subsidiaries - HELD THAT:- Since the interest free funds available with the assessee is more than the interest free loans given to subsidiaries, it should have to be presumed that the loans have been given out of interest free funds - As relying on Brindavan Beverages (P) Ltd [2016 (10) TMI 1242 - KARNATAKA HIGH COURT] we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete this disallowance. Deemed dividend u/s 2(22)(e) - assessee has received loan of ₹ 8,99,11,142/- from its subsidiary named M/s Assetz Property Services P Ltd, in which the assessee held 99.99% of shares - HELD THAT:- The expression “accumulated profits” would refer to the “Reserves and Surplus” accumulated over the years as per the accounts prepared under the Companies Act. - the term “accumulated profits” has been defined under Explanation 2 to sec.2(22)(e) of the Act. As the said definition does not provide for exclusion of any amount from the “accumulated profits”. Reversal of Deferred tax liability is nullifying the effect of provision created earlier, meaning thereby, the net monetary effect would be nil, when it is reversed - no adjustment need be made in the year of reversal. Accordingly, the accumulated profit amount determined by the AO is justified and accordingly we hold that the AO was justified in assessing the same as deemed dividend u/s 2(22)(e) - Accordingly, we reverse the order passed by Ld CIT(A) on this issue. Addition u/s 14A - HELD THAT:- Expression “does not form part of the total income” in Section 14A of the Act envisages that there should be an actual receipt of income, which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. In other words, Section 14A will not apply if no exempt income is received or receivable during the relevant previous year.
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