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2023 (1) TMI 209 - ITAT DELHIAddition of interest on free advances given by the appellant company - AO disallowed the total interest paid on the ground that the assessee had made various interest free advances - as per revenue Had the assessee charged interest from those parties, being an NBFC the interest income would have been more than whatever has been paid by the assessee and accordingly disallowed the whole of the interest paid by the assessee - HELD THAT:- It is a settled proposition of law as also held by various High Courts and the Hon’ble Supreme Court from time to time that where an assessee is enjoying interest free funds more than interest free advances, then there is a presumption that the interest free advances have been made out of the interest free funds available with the assessee and in that situation no interest paid by the assessee can be disallowed. In the case of the appellant also, the ITAT [2020 (4) TMI 94 - ITAT DELHI] also held the same and deleted the disallowances made by the Assessing Officer out of the interest. Disallowance u/s 14A - HELD THAT:- PMS charges should not have been considered for the purpose of disallowance under Rule 8D(2)(i) of the Rules and consequently even if it is required to be made, though not admitted, it has to be made keeping in mind the quantum of investment dealt in the preceding year and this year as well as income from current investment shown by the assessee. As far as disallowances required to be made under Rule 8D(2)(ii), it has to be restricted to 0.5% of the average investment yielding exempt income and not whole investment and that too. In the case of dividend from Dabur India Ltd., the assessee has not incurred any expenses at all because the assessee is one of the holding companies of Dabur India Ltd. and only a dividend warrant has been issued and deposited. Hence no expenses should be said to have been incurred by the assessee. The AO is directed to re-compute the disallowance taking into consideration the dividend yielding investments and to exclude PMS charges for computation of disallowance u/s 14A. The appeal of the assessee on this ground is allowed. Allowbale business expenses - Subscription expenses - HELD THAT;- The incumbent student was neither an employee nor associated with the company for any commercial or business purpose. The expediency of sponsoring the student has not been brought on record. Neither the student had contributed in any manner for augmenting, contributing to the business of the assessee. At the most, the sponsorship can be treated as a “charity” or “gratis” by the assessee company. Hence, none of the provisions of Section 36 and Section 37 are applicable to the expenditure in question. Hence, the appeal of the assessee on this ground is dismissed. Service charges paid to Dabur Securities - Dabur Securities Pvt. Ltd. is one of the group companies and carries out all the accounting works, secretarial charges, taxation work - whether direct or indirect - TDS work as well as the voucher reconciliation for all the group companies involved in finance. Whatever the expenses Dabur Securities incur, the same are allocated amongst the group companies in the ratio of turnover. Such expenses have also been incurred in the preceding year and no disallowances have ever been made. Copy of the agreement between the assessee and Dabur Securities has been placed at page 102 of the paper book. In subsequent years also, no disallowances have been made even after enquiry. Having gone through the facts on record, we hereby hold that the services charges paid is an allowable expenditure.
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