The Tax Publishers2021 TaxPub(DT) 1558 (Kol-Trib)

INCOME TAX ACT, 1961

Section 14A Rule 8D(2)(ii)

When assessee possessed mixed funds which included its own funds in sufficient quantity, a presumption that its own funds were utilized for the advances was to be drawn. Accordingly, no disallowance of interest expenses under section 14A was called for.

Disallowance under section 14A - Expenditure against exempt income - Interest expenses under rule 8D(2)(ii) - Assessee having sufficient own funds

Assessee earned tax free dividend income on investments in shares but claimed no disallowance under section 14A. AO invoked rule 8D(2)(ii) and disallowed interest expenses. Assessee claimed to have made investments out of sufficient own funds. Held: Assessee had own funds of Rs. 101 crores, whereas investment in shares was only to the tune of Rs. 11 crores which is only 11% of own funds and when assessee possessed mixed funds which include its own funds in sufficient quantity, a presumption that its own funds were utilized for the advances was to be drawn. Accordingly, no disallowance of interest expenses under section 14A was called for.

Relied:Reliance Utility and Powers Ltd. v. CIT (2009) 313 ITR 340 (Bom) : 2009 TaxPub(DT) 1275 (Bom-HC)

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2004-05


INCOME TAX ACT, 1961

Section 36(1)(iii)

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