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| The Tax Publishers2019 TaxPub(DT) 2173 (Bang-Trib) INCOME TAX ACT, 1961
Section 14A Rule 8D
Where AO made disallowance of direct interest expenses pertaining to tax exempt investments, but total interest free funds available with the assessee was more than investment in tax free securities, therefore, it was presumed that the investment was out of interest free funds available with the assessee and thus, the disallowance under section 14A read with rule 8D(2)(ii) was deleted.
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Disallowance under section 14A - Expenditure against exempt income - Disallowance of direct interest expenses - Availability of interest-free funds more than investment in tax free securities
AO made disallowance of direct interest expenses pertaining to tax exempt investments, which was confirmed by CIT(A). Assessee's contention was that it was having sufficient interest free own funds as share capital and reserves and surplus. Therefore, the disallowance of interest expenditure should be deleted.Held:Amount of interest free funds available with the assessee was compared with investment in tax free securities. It was found that the assessee was having interest free own funds in the form of share capital and reserves and surplus and in the form of CCDs on which no interest was being paid by the assessee. It was seen that total interest free funds available with the assessee was more than investment in tax free securities. Therefore, it was presumed that the investment was out of interest free funds available with the assessee. Thus, the disallowance under section 14A read with rule 8D(2)(ii) was deleted.
Relied:CIT & Anr. v. Microlabs Ltd. (2016) 383 ITR 490 (Karn) : 2016 TaxPub(DT) 2372 (Karn-HC).
REFERRED : CIT v. Reliance Industries Limited in Civil Appeal Nos. 10 to 13 of 2019, dt. 2-1-2019 : 2019 TaxPub(DT) 659 (SC).
FAVOUR : IN assessee's favour
A.Y. :
IN THE ITAT, BANGALORE BENCH
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