INCOME TAX ACT, 1961

Section 14A read with rule 8D

Disallowance under section 14A - Expenditure against exempt income - Assessee claimed that investment was made in its own subsidiary out of interest-free funds -

AO observed that assessee-company made investment in equity shares. It was further observed that the assessee incurred expenditure towards interest and finance charges. Accordingly, the AO made disallowance under section 14A read with rule 8D alleging that the assessee incurred such expenditure towards earning exempt income. Assessee submitted that entire investment in equity shares was made in its own subsidiary, out of interest-free funds available with it; therefore, no expenditure was incurred for making such investment and hence, the disallowance under section 14A read with rule 8D was not justified. Held: It was found that the Revenue Authorities could not point out any expenditure incurred by the assessee towards the alleged investment other than the apprehension of interest expenditure incurred, from the statement of accounts and the books of account produced by the assessee before them. Further, since the assessee claimed that the alleged investment was made in its 100% subsidiary out of non-interest bearing funds and it did not incur any expenditure towards such investment earning exempt income, the matter was remanded to AO to examine such claim of the assessee and if the claim of the assessee is found to be correct, then the disallowance under section 14A read with rule 8D is to be deleted.

REFERRED :

FAVOUR : Matter remanded

A.Y. : 2013-14

INCOME TAX ACT, 1961

Section 40(a)(ia)

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