Tribunal allows assessee's appeal, dismisses Assessing Officer's appeal, and upholds relief granted.

The Tribunal allowed the assessee's appeal, deleting the disallowance under Section 14A due to the absence of exempt income and overturning the disallowance of interest expenditure as capital expenditure. The Assessing Officer's appeal was dismissed as the disallowance under Section 14A had already been deleted, rendering the issue academic. The Tribunal upheld the relief granted to the assessee and declined to interfere in the matter, pronouncing the judgment on 16th November 2018.

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Issues:
1. Disallowance under Section 14A of the Income-tax Act, 1961.
2. Disallowance of interest expenditure as capital expenditure.

Issue 1: Disallowance under Section 14A:
The appeal by the assessee challenged the disallowance under Section 14A made by the assessing officer. The assessee argued that as there was no exempt income in the relevant assessment year, no disallowance under Section 14A should apply. The Tribunal upheld the assessee's plea based on the judgment of the jurisdictional High Court and deleted the disallowance of Rs. 20,62,097 under Section 14A. The decision was in line with the factual position that no exempt income was earned by the assessee during the relevant period.

Issue 2: Disallowance of Interest Expenditure as Capital Expenditure:
The second issue revolved around the disallowance of interest expenditure of Rs. 63,52,554 as capital expenditure by the assessing officer. The Tribunal noted that the borrowing was specifically for existing projects and there was no diversion from the end use of the borrowings. Referring to precedents, the Tribunal held that in the absence of specific details indicating diversion, the presumption was that the investment in new projects was from interest-bearing funds. The Tribunal directed the Assessing Officer to delete the disallowance of interest expenditure, as the basis for disallowance was deemed legally unsustainable. Consequently, the assessee's appeal was allowed in this regard.

Conclusion:
The Tribunal allowed the appeal of the assessee concerning both issues. The disallowance under Section 14A was deleted due to the absence of exempt income, and the disallowance of interest expenditure as capital expenditure was overturned based on the specific circumstances and legal precedents. The appeal filed by the Assessing Officer was dismissed as the disallowance under Section 14A had already been deleted in the assessee's case, rendering the issue academic and infructuous. The Tribunal pronounced the judgment on 16th November 2018, upholding the relief granted to the assessee and declining to interfere in the matter concerning the Assessing Officer's appeal.

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