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| The Tax Publishers2020 TaxPub(DT) 4465 (Ahd-Trib) INCOME TAX ACT, 1961
Section 14A Rule 8D(2)(ii)
Since, interest expenditure represented mostly the interest paid on bill discounting of IPPs and working capital loan from banks which were specifically meant for business purpose, therefore, matter regarding disallowance of interest expenses under section 14A read with rule 8D(2)(ii) was remanded to AO for verification with direction that in no case, disallowance under section 14A could exceed exempted income earned by assessee during the year.
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Disallowance under section 14A - Expenditure against exempt income - Invocation of rule 8D(2)(ii) - Interest expenses
Assessee earned tax free dividend income on investments in shares but claimed no disallowance under section 14A. AO noticed that own funds of assessee were less than the investments made. Accordingly, AO invoked rule 8D(2)(ii) and worked out disallowance.Held: AO failed to take note of the fact that interest expenditure represented mostly the interest paid on bill discounting of IPPs and working capital loan from banks which were specifically meant for business purpose. Therefore, matter was set aside to AO for verification with direction that in no case, disallowance under section 14A could exceed exempted income earned by assessee during the year.
REFERRED :
FAVOUR : Matter remanded.
A.Y. : 2009-10
INCOME TAX ACT, 1961
Section 37(1)
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