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2020 (3) TMI 1170 - ITAT AHMEDABADDisallowance of interest expenditure u/s 36(l)(iii) - diversion of interest bearing fund - HELD THAT:- Admittedly, the own fund of the assessee as on 31st March 2012 was excess to the amount of investment as evident from the Balance Sheet of the assessee - investment was made by the assessee for ₹ 2.43 crores out of its own funds despite the fact that the payment was made by the assessee out of the HDFC OD account as discussed above. In holding so we place our reliance on the judgment of the Hon’ble Gujarat High Court in the case of CIT vs. Amod Stamping (P.) Ltd. [2014 (7) TMI 753 - GUJARAT HIGH COURT] - we direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed. Foreign Tax Credit claimed by the Appellant u/s 91 disallowed - whether rate of tax in foreign country needs to be determined after considering the gross receipts or the net receipts/profit embedded in such gross receipts? - HELD THAT:- It is revealed that the amount of tax/super tax needs to be divided by the whole amount of income to work out the rate of tax. The word used whole amount of income denotes the income which signifies after the expenses. The word gross receipts have not been used therein. Even under the normal parlance, the income denotes only to the net profit i.e. gross receipts minus the expenses. Thus in our considered view, it is the only profit which should be considered while determining the rate of tax in the foreign country and the same needs to be compared with the rate of tax in India. In the case on hand, we also note that the assessee has not given any working about the expenses incurred in the foreign country against the gross receipts. Thus in the absence of sufficient details, the AO had no alternate except to work out the proportionate amount of income eligible for relief under section 91 of the Act. Accordingly we do not find any infirmity in the order of the authorities below. We note that there is force in the alternate argument of the learned AR for the assessee claiming for the deduction of the taxes paid in the foreign country as expenditure under section 37(1) of the Act. The amount of tax paid in a foreign country which is not eligible for benefit under section 91 of the Act, is expenditure eligible for deduction under section 37(1) of the Act. It is because such tax was paid in the course of the business and the corresponding business receipts were made to tax in India. We hold that the assessee is eligible for deduction for the amount of foreign tax credit which was not allowed as tax relief under section 91 of the Act. Hence the ground of appeal of the assessee is partly allowed.
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