INCOME TAX ACT, 1961

Section 14A

Disallowance under section 14A - Expenditure against exempt income - Assessee pleading to have made investments in foreign companies and strategic investments -

Assessee earned dividend income on investments in shares. AO invoked section 14A read with rule 8D and worked out disallowance. Assessee's case was that it had made investments in various companies including foreign companies as well Indian companies which, inter alia included associated companies/group companies/subsidiary companies and with respect to investments made in foreign companies, dividend income was taxable in India and also strategic investments or investments in subsidiary companies or group/associated companies in India had to be excluded for the purposes of section 14A. Held: Dividend income received from foreign companies was chargeable to income-tax in India and if that be so in case of assessee having offered for tax such dividend income received from foreign companies, then no disallowance of expenses under section 14A was warranted. So far as strategic investments or investments in subsidiary companies or group/associated companies in India were concerned, same had to be considered/included for making disallowance of expenses under section 14A, however, investments which yielded dividend income during the year under consideration were only to be considered for the purpose and disallowance under section 14A could not exceed exempt income. AO was directed to analyse every investments in context of aforesaid observations and made to disallowance under section 14A accordingly.

REFERRED :

FAVOUR : Matter remanded.

A.Y. : 2012-13

INCOME TAX ACT, 1961

Section 37(1)

SUBSCRIBE FOR FULL CONTENT