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TMI Blog2017 (8) TMI 660X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 36(1)(iii) - interest on unsecured loans - Held that:- No disallowance of interest on unsecured loans can be made. We also noted that the assessee had interest free surplus funds of ₹ 2447.49 lacs, which was sufficient to meet the investment made by the assessee in Hassan Biomass Company Pvt. Ltd. This fact is clearly borne out of the order of the CIT(A). The learned DR, even though relied on the order of the Assessing Officer, he could not contradict the fact that the interest free funds available with the assessee were much more than the investment made by the assessee in Hassan Biomass Company Pvt. Ltd. In view of this fact, the natural inference will be that the investment made amounting to ₹ 3,25,00,000/- in Hassan Bioma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure of ₹ 17,98,642/- u/s 14A read with Rule 8D. Aggrieved the assessee preferred appeal before the CIT(A). The CIT(A) made no disallowance in terms of Rule 8D(2)(ii) but restricted the disallowance to ₹ 5,97,861/- being 0.5% of the total investments in terms of the provisions of Rule 8D(2)(iii) by observing as under: 11. I have carefully considered the appellant's submissions, the observations of the Assessing Officer in the assessment order and the facts of the case. The issue of disallowance of expenditure u/s. 14A of the I.T. Act, has been examined in detail by my predecessor in the assessment year 2008-09 as well as in A.Y. 2009-10. In both these years, it was held that no disallowance was called for out of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest on borrowed funds for investments in these stocks. As a consequence, the application of the provisions of Rule 8D(ii) in this case is misplaced. 3.4. Further, from the details filed, it can be observed that the appellant company has in fact earned Interest income amounting to ₹ 1,63,33,413/-, which is included in Net Taxable Income, offered for taxation during the period under consideration. The appellant company has earned net interest income of Rs.Rs.1,32,70,280/- (Rs.1,63,33,413 30,63,133), rather than Interest Outflow of ₹ 30,63,133/- which taken as the interest payment by the AO. The appellant company has net interest income of ₹ 1,32,70,280/- on which the due taxes have been paid In view of the same also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order of the Assessing Officer could not produce before us any material or evidence, which may compel us to reverse the findings of the CIT(A). The CIT(A) has given a finding after appreciating the fact that no disallowance under Rule 8D(2)(ii) can be made in respect of the interest expenditure. We do not find any infirmity or illegality in the finding of the CIT(A). We, therefore, dismiss ground no.1 taken by the Revenue. 4. Ground no.2 relates to deletion of the addition of ₹ 26,54,640/- made by the Assessing Officer u/s. 36(1)(iii). The brief facts relating to this addition are that the Assessing Officer noted that the assessee had received unsecured loans amounting to Rs..2,21,22,000/- from the Directors, on which interest a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n though relied on the order of the Assessing Officer, he could not contradict the fact that the interest free funds available with the assessee were much more than the investment made by the assessee in Hassan Biomass Company Pvt. Ltd. In view of this fact, the natural inference will be that the investment made amounting to ₹ 3,25,00,000/- in Hassan Biomass Company Pvt. Ltd. are not out of unsecured loan but out of interest free surplus funds available with the assessee. We, therefore, confirm the order of the CIT(A) deleting the disallowance of ₹ 26,54,640/- made by the Assessing Officer u/s. 36(1) (iii) of the I T Act. 6. In the result, the appeal filed by the Revenue is dismissed. Order pronounced in the open court on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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