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TMI Blog2020 (11) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year 2011-12 on 30/9/2011 declaring nil income. Assessment was, however, complete under section 144 of the Income Tax Act, 1961 (for short "the Act") at an income of Rs. 14,56,43,816/- after adding Rs. 4,70,61,259/- under section 36 (1)(iii) of the Act by disallowing 15% of the interest expense, Rs. 19, 990/- by disallowing the preliminary expenses, Rs. 6,30,73,410/- under section 14A of the Act read with Rule 8D of the Income Tax Rules1962 ("the Rules") and Rs. 3,54,89,157/- by disallowing 10% of the total purchases made by the assessee from the group companies on the ground that the purchases are inflated to reduce the profits. 3. Assessee challenged all these four additions before the Ld. CIT(A) in appeal, but not pressed the gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence to prove the fact that the loan on which the interest and finance expenses were paid exclusively utilised for the purpose of the business of the assessee, learned Assessing Officer had taken a view that an amount equivalent to 15% of such interest expense, amounting to Rs. 4,70,61,259/- has to be disallowed under section 36 (1)(iii) of the Act. 6. Assessee produced the details of the interest paid on the loan and also the details of the interest received by the assessee and submitted that the interest expense has to be net of to the difference between the interest paid and interest received, namely, interest paid Rs. 31,37,41,731/- and the interest received Rs. 27,54,10,427/- and therefore the claim of the assessee towards the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning the income. In the circumstances there nothing improbable in the submission of the assessee that they are utilising the loans taken for advancing the loans to earn interest; and that both the interest paid and interest received are reflected in the financials of the assessee. 8. In the circumstances we are of the considered opinion that the submissions made on behalf of the assessee that the loans taken were utilised for advancing the loans in furtherance of their business and, therefore, the assessee is entitled to claim that the difference between the interest paid and interest received alone has to be considered towards the claim of interest expenditure and any disallowance of the interest expense has to be made only with reference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 ITR 338 (Del) followed in CIT vs. IP support services India Pvt. Ltd in ITA No. 283/2015 dated 24/9/2015 (Delhi), the action of the learned Assessing Officer in invoking section 14A of the Act read with Rule 8D of the Rules without recording his satisfaction cannot be approved. As a matter of fact, Ld. CIT(A) found that no satisfaction of the learned Assessing Officer was recorded nor at least such satisfaction could be discerned from the assessment order, as to why the voluntary disallowance made by the assessee was unreasonable and unsatisfactory (or lack of any suo moto disallowance), which is a mandatory requirement under law. Ld. CIT(A), therefore, deleted the addition on this score. 11. There is no dispute about the factual finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer and on verification of the record learned Assessing Officer reported that the letters dated 31/10/2013 and 27/11/2013 were to be found on record whereas the letter dated 9/12/2013 was not to be found. On verification of the letters to be found on the record more particularly the letter dated 27/11/2013, Ld. CIT(A) found that this letter contains the part where the details of purchases and sales and such details establish the fact that the assessee had purchased and sold goats in the same day the transactions being with a sister concerns, but the fact remains that both the purchases and sales with group concerns, the bogus purchases would naturally be offset with a bogus sale resulting in a zero-sum outcome. Ld. CIT(A) furth ..... X X X X Extracts X X X X X X X X Extracts X X X X
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