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TMI Blog2022 (5) TMI 297X X X X Extracts X X X X X X X X Extracts X X X X ..... ansfer entries by crediting Eisha Properties (the firm claiming deduction u/s 80IB) and debiting other firms (not having the benefit of deduction u/s 80IB). In this way, payment of interest by the assessee amounting to Rs.1.13 crore created income in the hands of Eisha Properties and expenditure in the hands of the assessee. In the like manner, the assessee received interest amounting to Rs.35,12,686 from various firms not having benefit of deduction u/s 80IB. By doing this exercise, interest income was created in the hands of Eisha Properties whose income was otherwise eligible for deduction u/s 80IB. This is how, the assessee created excess debit interest of Rs.78.56 lakhs in his hands for adjusting the same with the income earned from co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was offered u/s 14A. The ld. CIT(A) was reasonable in making disallowance at 0.5% of average investments under rule 8D(2)(iii). Such a disallowance, being, in conformity with the relevant provision, is hereby confirmed. - ITA No.1537/PUN/2017 - - - Dated:- 4-5-2022 - Shri R.S. Syal, Vice President And Shri Partha Sarathi Chaudhury, Judicial Member For the Assessee : Smt. Deepa Khare For the Revenue : Shri M.G. Jasnani ORDER PER R.S. SYAL, VP : This appeal by the assessee is directed against the order passed by the CIT(A), Pune-5, Pune on 20.02.2017 in relation to the A.Y. 2011-12. 2. The first issue is against the confirmation of disallowance of interest of Rs.78,56,948. Briefly stated, the facts of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The AO opined that the interest earned from the firms and paid to the firms was arranged in such a manner that loss of Rs.78,56,948 (Interest paid of Rs.1,13,69,634 minus Interest received of Rs.35,12,686) was created in the hands of the assessee without there being any commercial connection or corresponding liability in the hands of the firms to pay tax thereon. Since such excess amount was not loss in the real sense but because of adjustments made by the assessee in the Capital accounts of various firms, the AO held that the loss of interest of Rs.78,56,948 could not be allowed. He, therefore, made addition for the said sum. The ld. CIT(A) echoed the same. Aggrieved thereby, the assessee has preferred appeal before the Tribunal. 3. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to Rs.35,12,686 from various firms not having benefit of deduction u/s 80IB. By doing this exercise, interest income was created in the hands of Eisha Properties whose income was otherwise eligible for deduction u/s 80IB. This is how, the assessee created excess debit interest of Rs.78.56 lakhs in his hands for adjusting the same with the income earned from construction work in his proprietorship concern, M/s. Sohal Construction. As the transactions of withdrawals and investments were routed through transfer entries, there was a direct nexus between the amounts transferred from Eisha Properties through journal entries to other firms, such as, Eisha Asset Developers. The journal entries were passed with a view to create loss in the hands ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire gamut of material, he made disallowance at Rs.2,95,996 under rule 8D(2)(iii) of the Income-tax Rules, 1962 (hereinafter referred to as the Rules ) read with section 14A of the Act at 0.5% of average investments. 6. After considering the rival submissions and perusing the relevant material on record, it is seen as an admitted position that the assessee was having exempt income and no disallowance was offered u/s 14A. The ld. CIT(A) was reasonable in making disallowance at 0.5% of average investments under rule 8D(2)(iii). Such a disallowance, being, in conformity with the relevant provision, is hereby confirmed. 7. In the result, the appeal is partly allowed. Order pronounced in the Open Court on 04th May, 2022. - - TaxT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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