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The Tax Publishers2020 TaxPub(DT) 0784 (Jp-Trib) INCOME TAX ACT, 1961
Section 14A
Investment in mutual funds were made only to the tune of Rs. 60 crores during financial year 2007-08 which was reduced to 11 crores during financial year 2008-09 relevant to the assessment year under consideration. Hence, there was no increase in investment in mutual funds for the year under consideration. On the other hand, assessee had received Rs. 135 crores as share capital during the two years and thus assessee was having sufficient interest free funds for making investment during financial year 2007-08 and it could be safely presumed that no interest bearing funds had been diverted for making investment in mutual funds. Accordingly, no disallowance of interest expenditure under rule 8D(2)(ii) was callef for.
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Disallowance under section 14A - Expenditure against exempt income - Invocation of rule 8D - Interest expenses--Assessee having sufficient own funds
Assessee earned tax free income on investment in mutual funds. AO invoked section 14A read with rule 8D(2)(ii) and worked out disallowance of interest expenses. Assessee challenged this on the ground of having sufficient own funds.Held: Investment in mutual funds were made only to the tune of Rs. 60 crores during financial year 2007-08 which was reduced to Rs. 11 crores during financial year 2008-09 relevant to the assessment year under consideration. Hence, there was no increase in investment in mutual funds for the year under consideration. On the other hand assessee had received Rs. 135 crores as share capital during the two years and thus assessee was having sufficient interest free funds for making investment during financial year 2007-08 and it could be safely presumed that no interest bearing funds had been diverted for making investment in mutual funds. Accordingly, no disallowance of interest expenditure under rule 8D(2)(ii) was callef for.
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2009-10
INCOME TAX ACT, 1961
Section 14A Rule 8D(2)(iii)
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