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2018 (6) TMI 1225 - AT - Income TaxDisallowance u/s 14A - sufficiency of own funds - Held that - Assessee s own funds in the form of share capital reserves and surplus were 434.47 crore whereas the investments were only to the tune of 282.75 cr. which included the investments in subsidiary companies from strategic point of view. Thus the interest free funds available with the assessee and therefore the presumption has to be made that investments in the shares and securities were made out of interest free funds available with them. - Decided in favour of assessee. Disallowance u/s.14A while computing book profit u/s.115JB - Held that - This issue is covered in favour of assessee by the decision of M/s. Vireet Investment Pvt. Ltd. 2017 (6) TMI 1124 - ITAT DELHI wherein it has been held that the computation under clause (f) of Explanation 1 to section 115JB(2) is to be made without resorting to the computation as contemplated under section 14A read with Rule 8D of the Income Tax Rules. Thus respectfully following the said decision we restore this ground to the AO who shall decide the issue
Issues:
1. Disallowance under section 14A of the Act 2. Adjustment of Section 14A disallowance with book profit u/s 115JB of the Act 3. Levy of interest under section 234B and 234C of the Act Issue 1: Disallowance under section 14A of the Act: The appeal was against the upholding of disallowance of ?1,75,13,525/- by the CIT(A) as made by the AO, despite the assessee's suo moto disallowance of ?52,05,005/- towards expenses incurred on earning exempt income. The Tribunal considered the facts, including the assessee's earnings and disallowances, along with the availability of interest-free funds for investments. Relying on a previous decision, the Tribunal held that no further disallowance should be made under section 14A read with Rule 8D, as the assessee's own funds covered the investments made. Thus, the Tribunal directed the AO to delete the additions made under section 14A read with Rule 8D. Issue 2: Adjustment of Section 14A disallowance with book profit u/s 115JB of the Act: The appeal challenged the addition of disallowance under section 14A to the book profit computed u/s 115JB of the Act. Citing a Special Bench decision, the Tribunal ruled that the computation under section 115JB(2) should not resort to the calculation under section 14A read with Rule 8D. Consequently, the Tribunal restored this issue to the AO for reconsideration in line with the Special Bench decision. Issue 3: Levy of interest under section 234B and 234C of the Act: The AO was criticized for levying excess interest under sections 234B and 234C of the Act. The Tribunal granted the appellant's request to delete the additional interest levied, without further elaboration as the issue was deemed consequential. In conclusion, the Tribunal partly allowed the assessee's appeal, directing the deletion of the disallowances under section 14A read with Rule 8D and restoring the issue of adjustment with book profit to the AO. The excess interest levied under sections 234B and 234C was also directed to be deleted. The decision was pronounced openly on 20.06.2018.
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