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2022 (8) TMI 1138 - HC - Income TaxDisallowance u/s 14A r.w.r. 8D - Whether nexus between loan taken and investment made is found? - HELD THAT - As pointed out by the Hon ble Division Bench in M/S BINANI INDUSTRIES LTD. 2016 (9) TMI 1635 - ITAT KOLKATA there is a specific finding recorded by the Tribunal that the Assessing Officer had failed to establish that party funds were utilized for the purpose of acquiring shares and in view of availability of own funds with the assessee the expenditure ought not to have been disallowed. This being the finding of fact the Hon ble Division Bench held that the order of the Tribunal does not suffer from any perversity. The said finding and observation will squarely cover the case on hand. Therefore, we find no grounds to admit this appeal.
Issues:
1. Disallowance of interest on loan under Section 14A of Income Tax Act, 1961. 2. Inclusion of expenses related to investments in shares of subsidiary companies under Rule 8D of Income Tax Rules, 1962. 3. Computation of book profit under Section 115JB of Income Tax Act, 1961. Analysis: 1. The High Court considered the appeal filed by the revenue challenging the order passed by the Income Tax Appellate Tribunal related to the assessment year 2010-2011. The first substantial question of law raised was whether the expense on interest on a loan should be disallowed under Section 14A of the Income Tax Act, 1961, when no nexus between the loan taken and investment made is found. The Court noted that if this issue is decided in favor of the assessee, the second substantial question of law becomes academic. The Court referred to a previous case for the assessment year 2009-2010 where the Tribunal had ruled in favor of the assessee. The Court ultimately dismissed the appeal on this issue. 2. The second substantial question of law related to whether all expenses related to investments in shares of subsidiary companies should be included in the computation of expenses under Rule 8D of Income Tax Rules, 1962. The Court observed a specific finding by the Tribunal that the Assessing Officer had failed to establish that borrowed funds were used to acquire shares, and considering the availability of own funds with the assessee, the expenditure should not have been disallowed. The Court held that this finding was a fact and did not admit the appeal on this point, ultimately dismissing it. 3. The third substantial question of law concerned the computation of book profit under Section 115JB of the Income Tax Act, 1961. The Court noted that the revenue was on appeal only with regard to the deletion of the addition confirmed by the Commissioner of Income Tax, which resulted in a negative figure with no tax effect. The Court found this question also became academic. Therefore, the Court only considered the first substantial question of law and dismissed the appeal accordingly. The stay application was also dismissed. In conclusion, the High Court's judgment addressed the issues of disallowance of interest on a loan, inclusion of expenses related to investments in shares, and computation of book profit under the Income Tax Act, ultimately dismissing the appeal based on the specific findings and legal considerations presented in the case.
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