TMI Blog2020 (11) TMI 365X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) and direct the AO to delete the addition made by him - disallowance on excess interest payment made u/s. 36(1)(iii) is deleted. Therefore, this ground of appeal of the assessee is allowed. Disallowance u/s. 14A - HELD THAT:- We hold that no disallowance of interest expense claimed by the assessee can be made on account of investments under the provision of section 14A r.w.r. 8D of Income Tax Rules. Hence, we reverse the order of the authorities below. The AO is directed to delete the addition made by him on account of the interest expenses component. Accordingly, this ground of appeal is partly allowed. Disallowance u/s. 36(1)(va) r.w.s. 2(24)(x) - assessee has defaulted in depositing the contribution of employee s provided fund and ESIC within the prescribed due date - HELD THAT:- During the course of appellate proceedings before us, the ld. counsel has agreed that this issue has been decided by the Hon ble Jurisdictional High Court in the case of CIT vs. GSRTC [ 2014 (1) TMI 502 - GUJARAT HIGH COURT ] against the assessee. - ITA No. 1854/Ahd/2018 - - - Dated:- 7-10-2020 - Shri Rajpal Yadav, Vice President And Shri Amarjit Singh, Accountant Member For the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der. This action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. 9. The learned CIT(A) has erred in law and on facts of the case in confirming action of the Ld. A.O. in levying interest u/s. 234A/B/C of the Act. 3. The fact in brief is that return of income declaring income of ₹ 56,80,207/- was filed on 10th Sep, 2013. The case was subject to scrutiny and notice u/s. 143(2) of the Act was issued on 3rd Sep, 2014. The relevant facts pertained to the issue contested in the grounds of appeal filed by the assessee are narrated as under. Ground No. 1 (Disallowance of ₹ 22,21,096/- u/s. 36(I)(iii) of the Act) 4. During the course of assessment, the Assessing Officer noticed that assessee has debited interest expenditure of ₹ 96,10,085/- under the head finance costs. On perusal of the detail filed by the assessee, the Assessing Officer observed that assessee has paid interest to various parties amounting to ₹ 69,76,459/- @ 24% and to some of the parties @ 12%. On query, the assessee explained that non banking financial institutions were charging interest between 18 to 24% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the view that there cannot be any disallowance under the provisions of section 40A(2) of the Act without bringing any comparable cases based on cogent material. 13. It is also pertinent to note that the money was borrowed from the related parties in the earlier years and the interest paid to them was accepted in those years. Therefore in our considered view there cannot be any disallowance for the year under consideration on the money borrowed in the earlier year. In this regard we find support and guidance from the judgment of Hon'ble Karnataka High Court in the case of CIT vs.Sridev Enterprise reported in 192 ITR 165 wherein it was held as under: In the instant case the status of the amount standing as outstanding due from N on the first day of the accounting year was the amount that stood outstanding on the last day of the previous accounting year; therefore, its nature and status could not be different on the first day of the current accounting year, from its nature and status as on the last day of the previous accounting year. Regarding the past years, the assessee's claims for deductions were allowed in respect of the sums advanced during those years; this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) has restricted the disallowance to the extent of income to the amount of ₹ 1,54,676/-. 10. During the course of appellate proceedings before us, the ld. counsel has brought to our notice that assessee was having substantial interest free funds in the form of share capital of ₹ 81,04,600/- and reserve and surplus to the amount of ₹ 4,93,44,667/- totaling to the amount of ₹ 5,74,49,267/- as against the investment of ₹ 75,45,186/-. After referring the aforesaid position of substantial fund, the ld. counsel has submitted that no disallowance out of interest expenditure should be made in the case of the assessee. The ld. counsel has also referred the judicial pronouncement and stated that in the case of the assessee itself for assessment year 2012-13 the Co-ordinate Bench of the ITAT vide ITA No. 29/Ahd/2016 has deleted the disallowance made under the head interest component. On the other hand, the ld. Departmental Representative has supported the order of lower authorities. 11. We have gone through the order of the Co-ordinate Bench of the ITAT as referred above by the learned counsel. It is noticed that the Co-ordinate Bench has adjudicated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition made by him on account of the interest expenses. Respectfully following the decision of Co-ordinate Bench on similar facts and issue as cited above, we restricted the disallowance pertaining to administrative expenditure to the amount of ₹ 37,726/- and delete the disallowance pertaining to the interest component. Accordingly, this ground of appeal is partly allowed. Ground No. 3 (Disallowance u/s. 14A while computing book profit u/s. 115JB) 12. The Assessing Officer has taken into consideration the disallowance u/s. 14A for computing book profit u/s. 115JB. The ld. CIT(A) has dismissed the appeal of the assessee. 13. During the course of appellate proceedings before us, the ld. counsel has brought to our notice that this issue has been adjudicated by the Special Bench of the ITAT in the case ACIT vs. Vineet Investments 165 ITD 27 (Del) SB wherein it is held that disallowance u/s. 14A r.w. rule 8D cannot be subject matter of disallowance while computing book profit u/s. 115JB of the Act. The ld. Departmental Representative could not controvert this undisputed fact. Therefore, after following the decision of Special Bench in the above referred case of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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