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TMI Blog2017 (4) TMI 808X X X X Extracts X X X X X X X X Extracts X X X X ..... ghtly held that investment in all the three companies would form the part of average value of investment contrary to the finding of the AO. As we do not find any legal or factual infirmity in his order,so,confirming the same,we decide the first ground of appeal against the AO. Disallowance of interest u/s.36(1) (iii) - Held that:- We find that assessee had advanced loan to AFL, that it had not charged any interest from AFL, that it had on its own disallowed ₹ 11,77,28,592/- on interest free loans given to various entities.Though in the books of accounts the assessee had written off ₹ 6.58 crores, but, in the statement of income it had not claimed the deduction. But, we find that there is need to make further verification abou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .14A of the Act, that the issue raised by it is of legal nature and do not require investigation of facts.During the course of hearing before us, it was stated on behalf of the assessee that additional Ground dealt only with disallowance u/s.14A and it goes to the root of the issue.On behalf of the department it was stated that issue could be decided on merits. We have gone through the additional Grounds raised by the assessee.We find that with the passage of time clarity is emerging with regard to disallowance to be made under Rule 8D r.w.s. 14A of the Act, that various judicial forums have discussed and deliberated upon the issue at length. The issue raised by the assessee is a legal one, therefore, we are admitting it as per the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee had rightly considered the closing balances of investments and assets as on 31/ 03/2010 of three companies,that Rule 8D provided that for the purpose of the Rule,total assets would mean total assets as appearing in the balance sheet excluding the increase on account of the valuation of assets but including the decrease on account of the increase of assets, that for computation of disallowance what was material was to find out the average of the value of investment,that there was no merit in the argument of the AO in not including the part of the average value of investment, that the merger took place long back, that same was effective from a particular date as declared by the Honorable High Court, that there was no infirmity in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 6.69 crores, during the year under consideration, that out of the said amount it had written off ₹ 6, 56, 21,308/-and had debited the same to its profit and loss account. He directed the assessee to furnish the basis of calculation of interest offered for taxation on interest-free loan and advances and to explain as to why loan given to AFL was not considered for computation of interest offered for taxation. In its reply, the assessee stated that notional interest on advance to AFL at average borrowing rate of 8.54% would work out to ₹ 28.23 lakhs, that the principal loan balance itself was written off, that there was no question of considering the disallowance on the amount in question, that the loan written off itself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nced was out of the interest-bearing funds, that he had also not given any finding as to whether the assessee had considered the loan in question while disallowing the interest on interest-free loans, that it had disallowed interest paid of ₹ 11.77 crores, during the year under consideration, on interest-free loans given to various parties, that the AO had failed to establish that the income had any nexus with the interest that has not been charged by the assessee from AFL, that the assessee had on its own disallowed interest on interest-free loan given to various parties, that there was no scope of any further disallowance on that count. Accordingly, he deleted the disallowance as the same would amount to double disallowance. 4.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , with regard to the additional Ground of appeal the assessee has argued that the FAA should have restricted the disallowance u/s. 14A of the Act to the extent of ₹ 1.21 crores, that the disallowance u/s. 14A could not exceed the exempted income received by it amounting to ₹ 1,21,51,710/-, that even if the assessee inadvertently had made an excess suo moto disallowance in its computation of income the departmental authority should have given relief in accordance with the provisions of the Act. The AR relied upon the case of Joint Investments Pvt. Ltd.(372ITR694).The DR left the issue to the discretion of the Bench. 6.2. We find that the assessee had made a suo moto disallowance of ₹ 9.21 crores, that the AO had disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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