The Tax Publishers2019 TaxPub(DT) 2477 (Bang-Trib)

INCOME TAX ACT, 1961

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

As investments having yielded tax free dividend income were made out of non-interest bearing own funds available with assessee, therefore, no disallowance of interest expenditure under section 14A was called for.

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

Assessee earned tax free dividend income but claimed no disallowance of interest expenditure under section 14A. AO worked out disallowance in terms of rule 8D(2)(ii). Assessee's case was that no interest bearing funds had been diverted towards making of investments.Held: As apparent from financial statements furnished by assessee, it was having own funds of Rs. 1,212 lakhs and Rs. 2,636 lakhs as at the beginning and at the end of relevant financial year, however, investment made by the assessee stood at Rs. 1,051 lakh and Rs. 1,057 lakhs during the same period. Thus, own funds available with assessee were in excess of the value of investment and it could be safely presumed that investments had been made out of non-interest bearing own funds, accordingly, no disallowance of interest expenditure under section 14A was called for.

Relied:CIT v. Karnataka State Industrial & Infrastructure Development Corporation Limited (2016) 65 Taxmann.com 295 (Karn)) : 2016 TaxPub(DT) 840 (Karn-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2011-12


INCOME TAX ACT, 1961

Section 14A Section 8D(2)(iii)

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