TMI Blog2021 (8) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... OURT] wherein the disallowance has been restricted to the quantum of exempted income earned by the assessee in the relevant year. Before the Assessing Officer, the assessee mentioned that share of profit from partnership firm was claimed as exempt and Ld. CIT(A) has also restricted the disallowance to this amount. Respectfully, following the decision of the Hon ble Delhi High Court as cited by the Learned Counsel of the assessee, we direct the Assessing Officer to restrict the disallowance under section 14A of the Act to the quantum of exempted income earned by the assessee during the year under consideration. Accordingly, the ground of the appeal of the Revenue is dismissed. - ITA No. 7800/Del/2018 (Assessment Year: 2013-14) - - - Dated:- 30-7-2021 - SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER Appellant by : Sh. Satyajeet Goel, CA Respondent by : Sh. Mahesh Thakur, Sr.DR ORDER PER O. P. KANT, AM : This appeal by the Revenue is directed against order dated 26/09/2018 passed by the Learned Commissioner of Income-tax (Appeals)-3, Delhi [in short the Ld. CIT(A) ] for assessment year 2013-14 raising following grounds: 1. Wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that identical disallowance on same borrowed capital was made by the Assessing Officer in assessment year 2011-12 and 2012-13, which has been deleted by the Tribunal. In assessment year 2011-12, the order of the Tribunal has been upheld by the Hon ble Delhi High Court and, therefore, issue in dispute in the year under consideration is covered in favour of the assessee. 4.2 We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. The Assessing Officer observed that assessee had taken unsecured loan aggregating to ₹ 1635,24,22,344/- on which interest of ₹ 186,46,38,574/- was paid. He further observed that capital and reserve and surplus was of ₹ 274,41,45,816/- and, therefore, borrowed funds have been utilized for investment, interest free loans and advances and capital work in progress. According to the Assessing Officer, interest on borrowed capital was used for advances to assessee subsidiary company, which is not eligible for deduction under section 36(1)(iii) of the Act. The Learned Assessing Officer relied on various decisions cited in the assessment order including the decision of the Hon ble Pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 340681937 Interest claimed as per book 1864608574 Amount of Disallowance u/s 36(l)(iii) 1864608574*340681937/20114300114 = 31581435 4.3 Before the Ld. CIT(A), the assessee submitted that the issue in dispute was covered in favour of the assessee by the order of Ld. CIT(A) in earlier assessment years. It was also submitted that average of total interest-free fund (own funds) being share capital and reserve and surplus was of ₹ 336.19 crores as compared to average of loans and advances/investment of ₹ 34.07 crores. According to the assessee, the company had sufficient interestfree funds for making advances/investments. It was also submitted that advances/investment are part of the business activity and commercial expediency and same had been given/made wholly and exclusively for the purpose of the business only. It was submitted that investment in immovable property comprises of investment in golf land on which the assessee company has earned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iency is an expression of wide import and includes such expenditure as a prudent businessman incurs for the purpose of business. The Ld. CIT (A) has also referred to the judgment of Hon ble Delhi High Court in the case of CIT vs. Dalmia Cement (Pvt.) Ltd. reported in 254 ITR 377 wherein it had been held by the Hon ble High Court that once it was established that there was a nexus between the expenditure and the purpose of business, the revenue cannot justifiably claim to put itself in the armchair of the businessman and take up the role to decide as to how much is reasonable expenditure having regard to the circumstances of the case. Thereafter, the Ld. CIT (A) has given a categorical finding that in the instant case the loans and advances have been given on account of commercial expediency. The Ld. Sr. Departmental Representative could not point out any factual inaccuracy in the findings of the Ld. CIT (A) nor could she point out how the impugned order was not legally sustainable. Accordingly, we find no reason to interfere with the findings of the Ld. CIT (A) on this issue and we dismiss the grounds raised by the department. 4.3.1 The Hon ble Delhi High Court in ITA 39/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the ld. CIT (A). The appeal of the revenue on this ground is dismissed. 4.4 We find from the order of the Assessing Officer that most of the investments/advances are continued from last year i.e. assessment year 2012-13, wherein the Tribunal (supra) has deleted the disallowance under section 36(1)(iii) of the Act on the ground that advances/interest free loans have been given for business purposes in view of the commercial expediency. The facts of the year under consideration are also identical to facts of the case for assessment year 2011-12. In view of the above, respectfully following the decision of the Tribunal (supra) and decision of the Hon ble Delhi High Court (supra), we do not find any infirmity in the order of the Ld. CIT(A) on the issue in dispute and accordingly, we uphold the same. The ground of the appeal of the Revenue is accordingly dismissed. 5. In ground No. 2, the Revenue has raised objection against restricting disallowance under section 14A of the Act to ₹ 21,95,216/- as against disallowance of ₹ 40,06,714/- made by the Assessing Officer. 5.1 Before us, the learned DR relied on the order of the Assessing Officer. 5.2 The learned ..... X X X X Extracts X X X X X X X X Extracts X X X X
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