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2015 (10) TMI 2499

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..... sallowance on account of interest under section 14A an be made, we do not find any need to adjudicate these issues. - Decided against revenue. Administrative expenses disallowance under Rule 8D - Held that:- It is a fact on record that the assessee himself had disallowed an amount of ₹ 2,73,13,827/- on account of expenses incurred for earning tax free income and the Assessing Officer has nowhere recorded a finding as to why the disallowance so made by the assessee is not correct. Reliance is placed on the judgment of the Hon'ble Jurisdictional Punjab & Haryana High Court in the case of CIT Vs. Deepak Mittal (2013 (9) TMI 764 - PUNJAB & HARYANA HIGH COURT ) to the effect that in the absence of any satisfaction recorded by the Assessing Officer as to why the calculation made by the assessee is not correct, the disallowance made by him on account of administrative expenses under Rule 8D of the Income Tax Rules is not as per law. In view of the above disallowance made by the Assessing Officer under section 14 of the Act read Rule 8D of the Income Tax Rules is deleted. - Decided against revenue. Capitalization of interest - Held that:- The disallowance has .....

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..... under Rule 8D of the Income Tax Rules, which worked out at ₹ 6,90,42,168/-. Since the assessee had already disallowed an amount of ₹ 2,73,13,827/-, the remaining amount of ₹ 4,17,28,341/- was disallowed by the Assessing Officer. 4. Before the learned CIT (Appeals), the assessee submitted that all the expenditure incurred in relation to investment have been suo moto disallowed by the assessee being ₹ 2,73,13,827/-. Further, it was argued that the Assessing Officer has wrongly considered the investment, the income from which are taxable for calculating the average value of investment for Rule 8D of the Income Tax Rules. It was also submitted that the Assessing Officer has wrongly treated the gross interest of all units at ₹ 13,07,63,450/- irrespective of the purposes for which the loan was obtained instead of considering gross interest paid by main unit at ₹ 6,59,91,716/- where the investments are held as explained during the assessment proceedings. Further, it was also submitted that the Assessing Officer has not considered and reduced the interest received at ₹ 5,04,04,640/- and shown separately in the Profit Loss Account while disa .....

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..... as argued that the Assessing Officer has capitalized interest amounting to ₹ 20,24,929/- on an investment of ₹ 7,29,70,438/- in Paint shop, which was commissioned in January, 2008. This interest should also be reduced from the amount of total interest. Apart from these arguments, emphasis was given to the fact that the total investments in shares and mutual funds as on 31.3.2007 was ₹ 3,84,34,37,861/- which in the assessment year 2007-08 has been held to be out of own funds. The investment as on 31.3.2008 was ₹ 4,64,39,13,422/-. Thus, there was an increase of ₹ 80,04,75,561/- during the year. This was out of assessee s own funds, reserves and income of the year. Our attention was invited to page Nos. 42 and 45 of the Paper Book filed by the assessee to show that the reserves and own funds of the assessee company as on 31.3.2008 are ₹ 6,24,18,74,854/-. In this way, it was prayed that no disallowance of interest under section 14A of the Act can be made and as regards administrative expenses, it was submitted that the assessee having suo moto disallowed an amount of ₹ 2,73,13,827/-, no disallowance under section 14A of the Act be sustained. .....

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..... 9. Therefore, in such circumstances, no disallowance under section 14A of the Act on account of interest can be made. Though the learned counsel for the assessee has made alternative submissions on the computation made by the Assessing Officer under Rule 8D of the Income Tax Rules, in view of our finding that no disallowance on account of interest under section 14A an be made, we do not find any need to adjudicate these issues. 10. As regards administrative expenses, it is a fact on record that the assessee himself had disallowed an amount of ₹ 2,73,13,827/- on account of expenses incurred for earning tax free income and the Assessing Officer has nowhere recorded a finding as to why the disallowance so made by the assessee is not correct. Reliance is placed on the judgment of the Hon'ble Jurisdictional Punjab Haryana High Court in the case of CIT Vs. Deepak Mittal (2014) 361 ITR 131 to the effect that in the absence of any satisfaction recorded by the Assessing Officer as to why the calculation made by the assessee is not correct, the disallowance made by him on account of administrative expenses under Rule 8D of the Income Tax Rules is not as per law. In view o .....

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