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2017 (8) TMI 660 - ITAT MUMBAIAddition u/s 14A - interest expenditure - CIT(A) made no disallowance in terms of Rule 8D(2)(ii) but restricted the disallowance to ₹ 5,97,861/- being 0.5% of the total investments in terms of the provisions of Rule 8D(2)(iii) - Held that:- Assessing Officer could not produce before us any material or evidence, which may compel us to reverse the findings of the CIT(A). The CIT(A) has given a finding after appreciating the fact that no disallowance under Rule 8D(2)(ii) can be made in respect of the interest expenditure. We do not find any infirmity or illegality in the finding of the CIT(A). - Decided against revenue. Addition u/s 36(1)(iii) - interest on unsecured loans - Held that:- No disallowance of interest on unsecured loans can be made. We also noted that the assessee had interest free surplus funds of ₹ 2447.49 lacs, which was sufficient to meet the investment made by the assessee in Hassan Biomass Company Pvt. Ltd. This fact is clearly borne out of the order of the CIT(A). The learned DR, even though relied on the order of the Assessing Officer, he could not contradict the fact that the interest free funds available with the assessee were much more than the investment made by the assessee in Hassan Biomass Company Pvt. Ltd. In view of this fact, the natural inference will be that the investment made amounting to ₹ 3,25,00,000/- in Hassan Biomass Company Pvt. Ltd. are not out of unsecured loan but out of interest free surplus funds available with the assessee. We, therefore, confirm the order of the CIT(A) deleting the disallowance made by the Assessing Officer u/s. 36(1) (iii) of the I T Act. Appeal filed by the Revenue is dismissed.
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