Yuvak Ventures Pvt. Ltd. v. DCIT

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The Tax Publishers2019 TaxPub(DT) 3587 (Mum-Trib)

INCOME TAX ACT, 1961

Section 14A Rule 8D

If own funds were higher than tax free investments, no disallowance of interest expenditure could be made under section 14A. As regards, disallowance under rule 8D(2)(iii) same had to be restricted only to the extent of expenditure incurred, i.e., claimed in the return of income.

Disallowance udner section 14A - Expenditure against exempt income - Invocation of rule 8D - Disallowance of interest and administrative expenses--Assessee pleading to have sufficient own funds

Assessee earned tax free dividend income of Rs. 1.50 crores and claimed suo moto disallowance under section 124A of Rs. 4.06 crores. AO invoked rule 8D and worked out disallowance of interest expenses and administrative expenses that too in excess of administrative expenditure claimed in return of income. Assessee contended that own funds were higher than tax-free investments.Held: Matter remanded. If own funds were higher than tax free investments, no disallowance of interest expenditure could be made under section 14A. As regards, disallowance under rule 8D(2)(iii) same had to be restricted only to the extent of expenditure incurred, i.e., claimed in the return of income.

REFERRED : ACIT v. Iqbal M. Chaglaf, ITA No. 877/Mum/20l3) (Mum.) DCIT v. Derive Trading Pvt. Ltd. (ITA No. 310l/Mutn/20l2) (Mum.) ACIT v. Gagandeep Infrastructure Pvt. Ltd. (ITA No. 5784/Mum/2011) (Mum.) ACIT v. Passionate Investments Management (ITA No. 4578/Mum/20l2}(Mum.) Gillette Group India (P.) Ltd. v. ACIT (5 1 SOT 221) (Del-T) DCIT v. Renuka Financial Services Ltd. (ITA No. 3467/Del/2011) (Del-T) CIT v. Reliance Utilities & Power Limited (2009) 313 ITR 340) (Bom.) : 2009 TaxPub(DT) 1275 (Bom-HC) CIT v. HDFC Bank (2014) 366 ITR 505) (Bom ) : 2014 TaxPub(DT) 3351 (Bom-HC) HDFC Bank Ltd v. DCIT (2016) 383 ITR 529 (Bom.) : 2016 TaxPub(DT) 1316 (Bom-HC) CIT v. Microlabs Limited (ITA No. 471 of 2015) (Kar.) : 2016 TaxPub(DT) 2372 (Karn-HC) Mrs. Anahaita Nalin Shah v. ACIT (ITA No. 71 1 5/Mum/20l 3) (Mum.) Hind Filters Ltd. v. ACIT (ITA No. 1792 & 417/M/20I3) (Mum.) Palm Grove Beach Hotels Pvt. Ltd v. ACIT (ITA No. S63/M/201 3) (Mum.) Dena Bank v. DCIT (ITA No. 3676 & 4 II 3/M/2012) Proposition: Only those investments which have yielded exempt income during the year should be considered while computing disallowance under section I4A ACB India Ltd. v. ACIT (2015) 374 ITR 108) (Del.) : 2015 TaxPub(DT) 1966 (Del-HC) ACIT v. Vireet Investments (P) Ltd (2017) 82 taxmann.com 415) (Del. T rib.) (SB) : 2017 TaxPub(DT) 1760 (Del-Trib) M/s. Toshvm Analytical Pvt. Ltd v. DCIT (ITA No. 3089/Mum/20l3)(Mum)

FAVOUR : Matter remanded.

A.Y. : 2009-10

INCOME TAX ACT, 1961

Section 115JB