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| The Tax Publishers2019 TaxPub(DT) 0509 (Mad-HC) : (2019) 411 ITR 0370 : (2019) 261 TAXMAN 0197 INCOME TAX ACT, 1961
Section 14A
Though AO had neither established nexus between interest expenditure and exempt income nor considered that assessee had enough reserves for investments, thus, matter remanded back to AO to decide whether he was correct for disallowing the interest under section 14A, when the same was incurred on issuance of debenture for specific purpose of acquiring company and not for investment.
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Disallowance under section 14A - Expenditure against exempt income - Interest expenditure incurred on issuance of debenture for specific purpose of acquiring company -
Assessee earned a dividend income from Mutual Fund investments. AO made disallowance of a sum under section 14A read with rule 8D by rejecting claim of the assessee that the interest expenditure was incurred on debentures issued in financial year 2008-09 for specific purpose of acquiring a company in the past and not for investing in mutual funds. Tribunal also confirmed the disallowance of interest. Held: The AO had not established the nexus between the interest expenditure and exempt income and failed to consider that the assessee had enough accumulated reserves and surplus from the previous years and also enough cash flow from operation during the year of their investment. Therefore, the matter was remanded back to the AO to decide whether he was correct for disallowing the interest on debenture under section 14A when the assessee's case was that the interest expenditure was incurred on debenture issued in the financial year 2008-09 for the specific purpose of acquiring the company in the past and not for investment in the mutual funds.
REFERRED : Maxopp Investment Ltd. v. CIT (2018) 402 ITR 640 (SC) : 2018 TaxPub(DT) 1403 (SC)
FAVOUR : Matter remanded
A.Y. : 2012-13
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