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2020 (2) TMI 577 - HC - Income TaxDisallowance u/s 36(1)(iii) - assessee could not prove nexus of interest of interest free loans given to others with interest free fund - addition of proportionate interest on the ground that respondent assessee did not charge interest on the loans advanced and investment made in the group companies - HELD THAT - Findings of fact arrived at by CIT(Appeals) and the Tribunal wherein the Assessing Officer is directed to recompute the proportionate disallowance by taking total interest expenditure is without any ambiguity and as such there is no infirmity in the order passed by the First Appellate Authority as well as the Tribunal in view of the concurrent findings of fact. The order of the Tribunal so far as this issue is concerned, does not require any interference. Accordingly the appeal stands dismissed qua question no. 2(A) is concerned. Appeal admitted on Question 2(B), 2(C) and 2(D) B Whether the Appellate Tribunal has erred in law and on facts by upholding the decision of the CIT(A) deleting the disallowance of ₹ 42,90,471/- made by the Assessing Officer under Section 14A r.w. Rule 8D? C Whether the Appellate Tribunal has erred in law and on facts by upholding the decision of the CIT(A) deleting the disallowance of depreciation of ₹ 5,00,000/- on the assets not put to use in the year under consideration in respect of non-operative multi metal project at Ambaji? D Whether the Appellate Tribunal has erred in law and on facts by upholding the decision of the CIT(A) deleting the disallowance of ₹ 31,15,94,168/- claimed under Section 80IA of the Act?
Issues Involved:
1. Disallowance under section 36(1)(iii) of the Income Tax Act, 1961 2. Disallowance under Section 14A r.w. Rule 8D of the Act 3. Disallowance of depreciation on assets not put to use 4. Disallowance claimed under Section 80IA of the Act Issue 1: Disallowance under section 36(1)(iii) of the Income Tax Act, 1961 The issue arose from the disallowance made by the Assessing Officer under section 36(1)(iii) amounting to a specific sum due to the respondent assessee not charging interest on loans advanced and investments made in group companies. The respondent contended that the loans were given to sister concerns for business purposes only, and there was no diversion of funds. The CIT(Appeals) directed the Assessing Officer to compute the disallowance after excluding interest with a direct nexus to the purpose for which the money was borrowed. The Tribunal upheld the CIT(A) findings, emphasizing the direct nexus of interest expenses with specific purposes, leading to the dismissal of the Revenue's appeal. Issue 2: Disallowance under Section 14A r.w. Rule 8D of the Act The question arose regarding the disallowance of a specific amount made by the Assessing Officer under Section 14A r.w. Rule 8D. The CIT(Appeals) deleted the disallowance, and the Tribunal upheld this decision. The Tribunal found no infirmity in the order passed by the CIT(A) and dismissed the Revenue's appeal, considering the interest expenditure's direct nexus with specific purposes. Issue 3: Disallowance of depreciation on assets not put to use The issue concerned the disallowance of depreciation amounting to a specific sum on assets not put to use in the relevant year regarding a non-operative multi-metal project at Ambaji. The CIT(Appeals) deleted the disallowance, and the Tribunal admitted this question for consideration along with other related questions in separate tax appeals. Issue 4: Disallowance claimed under Section 80IA of the Act The question arose from the disallowance of a specific sum claimed under Section 80IA of the Act. The Tribunal admitted this issue for consideration along with other related questions in separate tax appeals. The appeal was to be heard with other tax appeals admitted by the Court. In conclusion, the judgment addressed various issues related to disallowances under different sections of the Income Tax Act, 1961. The CIT(Appeals) and the Tribunal examined the direct nexus of expenses with specific purposes in determining the disallowances, leading to the dismissal of the Revenue's appeals in some instances. The Court admitted certain questions for consideration in conjunction with other related tax appeals for further review.
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