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2015 (8) TMI 1277 - PUNJAB AND HARYANA HIGH COURT

2015 (8) TMI 1277 - PUNJAB AND HARYANA HIGH COURT - [2016] 381 ITR 204 - Disallowance of proportionate interest under section 36(i)(iii) - existence of commercial expediency - ITAT deleted the disallowance - Held that:- The Commissioner of Income-tax (Appeals) and the Tribunal found as a matter of fact that the company had interest-free advances from its directors/shareholders and the members of their families amounting to ₹ 315.11 lakhs as against the interest-free advances made by the co .....

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in the business inter alia of making investments in shares and property. We are entirely in agreement that merely because the assessee has given out some of its properties on rent, it does not lead to the inference that investments in other properties are not for business purposes. We are unable to see why such a view has been taken. The assessee can always give out its properties on rent and acquire further properties towards investment.- Decided in favour of assessee.

Disallowance .....

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ble and relevant evidence. It was further held that the onus to prove that interest bearing funds were used lies squarely on the Revenue. The issue, therefore, in this regard was based only on the facts. The least that must be said in favour of the respondents is that the findings of fact recorded by the Commissioner of Income-tax (Appeals) and by the Tribunal are not perverse and that the view taken by them is certainly a possible view.- Decided in favour of assessee. - I. T. A. No. 354 of 2013 .....

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substantial questions of law arise : "(i) Whether on the facts and in the circumstances of the case, the hon'ble Income-tax Appellate Tribunal is right in law in upholding the order of the learned Commissioner of Income-tax (Appeals) in which disallowance of proportionate interest at ₹ 23,54,722 under section 36(i)(iii) was deleted, ignoring the facts that no proof of commercial expediency and business purpose was provided. (ii) Whether on the facts and in the circumstances of th .....

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different colour and that the only requirement to disallow the interest paid on the borrowing to the extent the interest-free amount is lent to sister concern for non-business purposes would be that the assessee has some loans or other interest bearing debts to be repaid. (iii) Whether on the facts and circumstances of the case, the hon'ble Income-tax Appellate Tribunal was right in law in relying upon the decision of the jurisdictional High Court in the case of CIT v. Winsome Textile Indus .....

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,819 on the ground that the assessee could not give any proof that such immovable assets would be used for business purpose, thus making its investments non-eligible for deduction, was deleted by the Commissioner of Income-tax (Appeals). (v) Whether on the facts and circumstances of the case the hon'ble Income-tax Appellate Tribunal was right in law in upholding the order of the learned Commissioner of Income-tax (Appeals) in which disallowance under section 14A read with rule 8D made at  .....

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n the facts and in the circumstances of the case and in law the Income-tax Appellate Tribunal has erred in holding that when an assessee does not claim any exempt income the section 14A would not apply as the income has to be computed as per the pro vision of the Income-tax Act and not as per the option of the asses see." Re : Question Nos. 1, 2 and 3 3. The Commissioner of Income-tax (Appeals) and the Tribunal found as a matter of fact that the company had interest-free advances from its d .....

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Gurdas Garg v. CIT (Appeals) (P&H) where we held as under (page 108) : "It is a little difficult to understand these observations. It has not been denied that interest-free funds were available. Nor has it been denied that interest-free advances were made by the appellant. In fact, the latter has been accepted by the Assessing Officer. The contention that the appellant has not established that it was the interest- free funds that were actually advanced as interest-free advances is with .....

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Questions Nos. 1 to 3 are, therefore, answered against the appellant. Re : Question No. 4 5. As found by the Commissioner of Income-tax (Appeals) and the Tribunal, the respondent-assessee is in the business inter alia of making investments in shares and property. We are entirely in agreement that merely because the assessee has given out some of its properties on rent, it does not lead to the inference that investments in other properties are not for business purposes. We are unable to see why s .....

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d in favour of the assessee on the facts. Mr. Katoch submitted that where income is chargeable to tax, it is not open to the assessee to nevertheless pay the tax on such income and then claim that it is not exempted income even though it is in law exempted income. We refrain from expressing any opinion regarding the interpretation of section 14A(1) as in the present case, the Commissioner of Income-tax (Appeals) and the Tribunal have deleted the disallowance made by the Assessing Officer on the .....

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red for earning this dividend income. 8. The entire record of the assessee was available. The assessee cannot establish the negative. If the Assessing Officer disbelieved the assessee, it was for him to have established the same from the records or otherwise. The Assessing Officer has not even considered this assertion expressly made by the assessee. The Assessing Officer's conclusion that the assessee had not provided details of expenses incurred on making these investments, therefore, cann .....

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