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2019 (8) TMI 544

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..... n of same business already carried on. Thus, the same were claimed as revenue expenses. Similarly on netting of interest assessee has given a bonafide explanation as how the interest income and interest expenditure had a direct nexus. By making such a claim it cannot be held that assessee has furnished any inaccurate particulars of income or concealed any particulars of income. Simply because disallowances have been made without any adverse material on record but on some legal interpretation, then no penalty can be levied in view of the decision of Hon’ble Apex Court in the case of Reliance Petro Products Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT] The findings and reasons of the Ld. CIT (A) for deleting the penalty is thus upheld - D .....

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..... med deductions on the following income which are not related to business:- Interest income (FDR interest) ₹ 19,41,723/- Rent ₹ 7,26,000/- Miscellaneous income ₹ 14,56,415/- Total ₹ 41,24,138/- 3. Accordingly, AO has made the disallowance of ₹ 20,62,069/-. He has also made further addition on account of disallowance of expenses of Jaipur project and disallowance on account of netting of interest income. The details of addition made by the AO are as under: - PARTICULARS AMOUNT Disallowance of deduction u/s. 80IB(7) 20,62,069/- Disallowance of expenses of Jaipur Project 54,84,341/- Disallowance on account of netting of interest income 19,39,562/- TOTAL 94,85,972/- All these additions have been confirmed by the Ld. .....

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..... as well. 5. After considering the relevant findings given in the impugned orders as well as the arguments placed by the Ld. DR, we find that the assessee has given following explanation before the authorities below on the issue of levy of penalty:- The assessee claimed deduction u/s 80IB of the act on income derived from hotel business which includes interest income on short term surplus fund which was kept for running the hotel business, rent received from shop opened for giving facility to customer as the hotel was situated far away from populated area and misc. income derived from various hotel activities. As the above incomes have direct nexus with hotel business, these are income derived from hotel business and thus eligible for deduc .....

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..... for construction of the Jaipur hotel. In order to mitigate cost of borrowing, it has invested the unutilized loan amount in short term FDR. It has netted interest earned on short term deposit of ₹ 19,39,562/- with interest paid on Term Loan and capitalized the net interest to Jaipur project. This is based on the established principles and various judicial pronouncements. The net interest is duly capitalized to Jaipur Hotel Project. Moreover, short term investment in FDR was made out of term loan received by the appellant company, interest on term loan attributable to the amount invested in FDR is the expenditure laid out or expended wholly and exclusively for the purpose of earning interest income on FDR and thus qualify for deductio .....

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