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2023 (12) TMI 207 - ITAT BANGALOREAddition u/s 14A r.w.r. 8D - Addition on the entire average value of current and non-current investments - assessee pleaded before the CIT(A) that no disallowance can be made because the assessee had own funds more than the investments made and no administrative expenditure was incurred - HELD THAT:- We observe from the financial statements that the assessee has received dividend income only on current investments and the computation of disallowance submitted by the ld. AR comes to Rs. 7,65,072. However, we note from the order of the AO that during the course of assessment proceedings the assessee itself submitted that dividend is earned on equity shares and mutual funds, but in the computation of disallowance submitted before us, only the average value of investments made in mutual funds has been considered. Disallowance under Rule 8D(2) (iii) should be made on the basis of average value of those investments in which the assessee has yielded exempt income. The Hon’ble High Court in the case of Cargo Motors (P.) Ltd. [2022 (10) TMI 571 - DELHI HIGH COURT] has settled this issue in favour of the assessee. Thus we remit this issue to the file of the AO for fresh computation of disallowance under Rule 8D(2)(iii). The assessee is directed to provide necessary documents in support of its claim and avoid seeking unnecessary adjournment for early disposal of the case. Disallowance of interest u/s 36(1)(iii) - Interest paid to IDFC has been capitalized by the AO by observing that the capital asset (land) purchased for which loan was taken, was not put to use in the business of the assessee and the assessee is not in the business of trading of land and this land has been purchased as investment, and therefore it should be capitalized u/s. 36(1)(iii) - HELD THAT:- As interest bearing funds have not been utilized for the purchase of land and the assessee had sufficient interest free funds and also observed by the coordinate bench in the assessee’s own case for earlier AYs 2013-14 & 2014-15 [2019 (4) TMI 512 - ITAT BANGALORE] The case law relied by the ld. AR of the assessee in his written synopsis supports the case of the assessee. After analysis of the above, we hold that the assessee has not utilized the borrowed fund for the purchase of land. The assessee has also sufficient opening cash balance as per Note No.17 and cash flow statement. Further, the assessee’s submission that no interest bearing funds have been utilized is supported by the case laws referred by the assessee. Considering the entire facts and submissions, we hold that the land purchase by the assessee is out of non-interest bearing funds. Therefore the disallowance of interest u/s 36(1)(iii) is not warranted and the same is deleted. We therefore allow ground No. 03 of the assessee.
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