TMI Blog2017 (5) TMI 1304X X X X Extracts X X X X X X X X Extracts X X X X ..... ch a situation section 14A of the Act would have no application. See Cheminvest Limited Versus Commissioner of Income Tax-VI [2015 (9) TMI 238 - DELHI HIGH COURT] - Decided in favour of assessee Addition u/s 36(1)(iii) - proportionate interest on borrowed funds used for acquisition of capital asset - availability of own funds - Held that:- We find that the assessee had sufficient own funds and reserves to purchase new assets, that there is no evidence to prove that existing work in progress had increased because of loans taken by the assessee.The balance sheet of the assessee proves that it had sufficient fund.Therefore,respectfully following the judgment of Reliance Utilities and Power Ltd.(2009 (1) TMI 4 - BOMBAY HIGH COURT) we decide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 9.34 crores+ 0.5% of average investment ₹ 1.26 crores).He further observed that the assessee had already made disallowance of ₹ 8.24 crores in its computation. Finally,he made an addition of balance amount of ₹ 4.8 crores to the total income of the assessee. 2.1. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority(FAA)and made elaborate submissions. After considering the assessment order and the submission of the assessee,he held that the assessee had acquired 100%ownership interest in the Nutrine Confectionery Company Ltd.for a consideration of ₹ 253crores, that while acquiring the business it had specified borrowing of ₹ 60 crores to fund the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntative (DR) supported the order of the AO and stated that there was difference between receipt and income. The Authorised Representative (AR) supported the order of the FAA and referred to the case is of Cheminvest Ltd. (378 ITR 33). 2.4. We have heard the rival submissions and perused the material before us. We find that the assessee had made a disallowance of ₹ 8.24 crores on its own, that the AO had made further disallowance,u/s.14A read with Rule 8D of the Rules, of ₹ 4.85 crores,that the assessee had not claimed any expenditure against the exempt income. Here,we would like to mention that basic principles of taxation jurisprudence stipulate that there should not be double deduction as well as double taxation.The fundam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the relevant previous year. Considering the above and respectfully following the judgment of Cheminvest (supra),we decide the effective ground of appeal against the AO. ITA/1409/Mum/2015: 3. Effective ground of appeal, raised by the assessee, is about disallowance made 36(1)(iii) of the Act.During the assessment proceedings, the AO directed the assessee to show cause as to why proportionate interest on borrowed funds used for acquisition of capital asset should not be disallowed 36(1)(iii) of the Act.After considering the submission of the assessee dated 27/ 11/ 2013,the AO observed that the verification of the balance sheet revealed that during the year under consideration the capital work in progress increased &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own funds, that the interest free fund available to the assessee was ₹ 299.3 crores, that the investment during the year was made in the 100% subsidiuary company.He relied upon the case of Reliance Utilities and Power Ltd.(313ITR340).The DR argued that cash flow statement was not furnished, that the assessee had not established as to how funds were utilized. 3.3 .We have heard the rival submissions and perused the material before us.We find that the assessee had sufficient own funds and reserves to purchase new assets, that there is no evidence to prove that existing work in progress had increased because of loans taken by the assessee.The balance sheet of the assessee proves that it had sufficient fund.Therefore,respectfully fol ..... X X X X Extracts X X X X X X X X Extracts X X X X
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