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of <h1>ITAT Delhi: Ruling on Interest Addition & Disallowance Percentage.</h1> <h3>Addl. CIT Special Range-4 New Delhi Versus Innovative B2B Logistics Solutions (P) Ltd. And (Vice-Versa)</h3> Addl. CIT Special Range-4 New Delhi Versus Innovative B2B Logistics Solutions (P) Ltd. And (Vice-Versa) - TMI Issues involved:The judgment involves two main issues: 1. Deletion of addition of interest under section 14A of the Act with rule 8D.2. Disallowance of interest at a percentage of 6% as against 12% applied by the Assessing Officer.Issue 1: Deletion of addition of interest under section 14A of the Act with rule 8D:The Appellate Tribunal ITAT Delhi heard cross appeals by the revenue and the assessee against the CIT(A)'s order for A.Y. 2014-15. The revenue contended that the CIT(A) erred in deleting the addition of Rs. 19,11,668 made by the AO for disallowance of interest under section 14A with rule 8D. The AO found that the assessee had made investments in shares but had not made any disallowance under section 14A. The CIT(A) deleted the addition after considering facts and the decision of the Delhi High Court in the case of Cheminvest Ltd. The Tribunal declined to interfere with the CIT(A)'s findings based on the absence of exempt income, citing the decision in the case of Era Infrastructure (India) Ltd.Issue 2: Disallowance of interest at 6% instead of 12%:The second issue pertained to the disallowance of interest at 6% as opposed to 12% applied by the AO. The AO computed the disallowance based on the belief that the assessee diverted interest-bearing funds towards its subsidiary company as interest-free loans. The CIT(A) reduced the disallowance from 12% to 6%. The Tribunal, after considering the available interest-free funds and advances given to the subsidiary, referred to the Supreme Court's decision in Reliance Industries case. It held that no disallowance of interest expense is warranted when interest-free funds exceed interest-free advances. Consequently, the Tribunal directed the AO to delete the additions. In conclusion, the Appellate Tribunal ITAT Delhi dismissed the revenue's appeal and allowed the assessee's appeal concerning the deletion of interest addition under section 14A and the reduction of disallowance percentage from 12% to 6%. The judgment was pronounced in open court on 14.07.2023.
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