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TMI Blog2018 (1) TMI 782X X X X Extracts X X X X X X X X Extracts X X X X ..... for adjudication. Disallowance of interest expenditure under section 36(1)(iii) / section 57(iii) - Commissioner (Appeals) disallowed 6% out of interest expenditure incurred by the assessee only on the reasoning that while the assessee has paid interest @ 18% on the borrowed fund it has received interest @ 12% on interest bearing advances made to the joint venture - Held that:- The rate of interest at which the assessee has borrowed funds cannot be made applicable to the interest bearing advances made to the joint venture as the joint venture is constituted by the partners and the assessee apart from receiving the interest income has also a share in the distribution of the income of the joint venture. Moreover, the interest bearing adva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nse to the query raised by the Assessing Officer, the assessee made detailed submissions before the Assessing Officer stating therein that it has not done any investment during the year other than the investment in capital account of the joint venture and only income earned by assessee during the year is interest income from the joint venture which has been offered to tax and share in profit / (loss) from the joint venture. Thus, it was submitted by the assessee that it has not earned any exempt income during the year to suffer disallowance under section 14A of the Act. Further, the assessee submitted, since it has voluntarily made a disallowance of ₹.1,08,00,000 under section 14A in the computation of income, no further disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals), assessee is in appeal before us. 5. In grounds no.1 and 2 of the revised Form no.36 filed on 23rd February 2017 for Assessment Year 2009 10, the assessee has challenged the decision of the first appellate authority in not allowing netting off of interest received against the interest paid while computing disallowance under section 14A. That besides, the assessee has also raised an additional ground on the issue that no disallowance under section 14A can be made in respect of share income received from association of persons (AOP). Therefore, even the disallowance made voluntarily by the assessee is sought to be deleted. 6. The learned Authorised Representative submitted, apart from the fact that Assessing Officer failed to reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it under section 14A through detailed submissions. However, the Assessing Officer except recording a vague and general observation that the submissions of the assessee was not found tenable has not recorded any satisfaction as to why the claim of the assessee with regard to the disallowance made by it under section 14A is not correct having regard to its books of account. Section 14A(2) of the Act which has been introduced to the statute w.e.f. 1st April 2007 by Finance Act, 2006 mandates recording of satisfaction by the Assessing Officer on the correctness of assessee s claim having regard to its accounts. Even, rule 8D(1) also postulates similar recording of satisfaction by the Assessing Officer. The Hon'ble Jurisdictional High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly or not at all. The satisfaction to be recorded by the Assessing Officer under section 14A(2) cannot be substituted by the satisfaction recorded by the first appellate authority, even, accepting the fact that his power is co terminus with that of the Assessing Officer. That being the case, the Assessing Officer could not have done any further disallowance under section 14A r/w rule 8D. 9. Having held so, it is now necessary to look into the issue whether the assessee s claim that suo motu disallowance made by it under section 14A also requires to be deleted. As could be seen, from the facts on record, before the Assessing Officer and the first appellate authority the assessee had contended that it had not earned tax free income in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s derived from the joint venture. With the aforesaid observations, no separate adjudication of ground no1 2 is required and ground no.4 is allowed for statistical purposes. Our aforesaid decision will apply mutatis mutandis to similar issue raised in ITA no.3841/MUM/2015. 10. The only other common issue raised in both the appeals relates to part disallowance of interest expenditure under section 36(1)(iii) / section 57(iii) of the Act. 11. We have heard the rival contentions and perused the material on record. The learned Commissioner (Appeals) has disallowed 6% out of interest expenditure incurred by the assessee only on the reasoning that while the assessee has paid interest @ 18% on the borrowed fund it has received interest @ 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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