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| The Tax Publishers2021 TaxPub(DT) 2633 (Mum-Trib) INCOME TAX ACT, 1961
Section 14A Rule 8D(2)(ii)
Where assessee had sufficient interest-free funds in the form of share capital and reserves, which were much more than the investments that actually yielded exempt income to the assessee; the disallowance made under section 14A read with rule 8D(2)(ii) would not be sustainable.
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Disallowance under section 14A - Expenditure against exempt income - Assessee having sufficient interest-free funds in form of share capital and reserves -
Assessee-company was engaged in business of generation, transmission and distribution of electricity. It earned dividend income, which was claimed as exempt in return of income. It made suo-moto disallowance under section 14A read with rule 8D towards expenses attributable to earning of exempt income. However, AO proceeded to apply computation mechanism provided in rule 8D(2)(ii) and made disallowance over and above the suo-moto disallowance made by the assessee.Held: Since assessee had sufficient interest-free funds in the form of share capital and reserves, which were much more than the investments that actually yielded exempt income to the assessee; the disallowance made under section 14A read with rule 8D(2)(ii) would not be sustainable and accordingly, the same was deleted.
Followed:CIT v. HDFC Bank Ltd. (2014) 366 ITR 505 (Bom-HC) : 2014 TaxPub(DT) 3351 (Bom-HC).
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2015-16
INCOME TAX ACT, 1961
Section 14A Rule 8D(2)(ii)
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