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2017 (11) TMI 1818 - ITAT CHANDIGARHDisallowance of interest u/s 36(1)(iii) on advances - assessee utilized mixed funds for investment - HELD THAT:- In the case of Bright Enterprises Pvt. Ltd. Vs. CIT [2015 (11) TMI 342 - PUNJAB & HARYANA HIGH COURT] it was held that if there are interest free funds available then it will be presumed that these have been made out of interest free funds. Similar view was held in the case of CIT Vs. Kapsons Associates Investment Pvt. Ltd. [2015 (8) TMI 1277 - PUNJAB AND HARYANA HIGH COURT] wherein, held that interest on investment in other properties not for business purpose cannot be disallowed if the assessee is having sufficient interest free funds at its disposal. Similar view was taken in the case of Hero Cycles Pvt. Ltd. [2015 (11) TMI 1314 - SUPREME COURT] once it is a established that there is a nexus between the expenditure and the purpose of the business no disallowance is called for. Thus the disallowance made on account of interest is hereby deleted. Addition under section 14A - disallowance based on the calculation made as per Rule 8D(2) taking the total interest expenditure, average value of investments, average value of assets and half percentage of average value of investments into consideration - HELD THAT:- Delhi High Court in case of Joint Investments Pvt. Ltd. Vs. CIT [2015 (3) TMI 155 - DELHI HIGH COURT], AMAR PACKAGING PVT. LTD. [2016 (5) TMI 282 - ITAT DELHI] and M/S DAGA GLOBAL CHEMICALS PVT. LTD. [2015 (1) TMI 1204 - ITAT MUMBAI] has taken view that disallowance cannot exceed the exempt income. Hence keeping in view the abovementioned judgments it is hereby directed the disallowance under section 14A read with Rule 8D be restricted to the exempt income earned by the assessee. The appeal of the Revenue is allowed for statistical purposes.
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