The Tax Publishers2020 TaxPub(DT) 5427 (Pune-Trib)

INCOME TAX ACT, 1961

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

Where investments bearing tax-free income were made out of sufficient own funds available with assessee, no disallowance of interest under rule 8D(2)(ii) was called for.

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

Assessee earned tax-free dividend income on investment in shares but claimed no disallowance under section 14A. AO invoked rule 8D(2)(ii) and disallowed interest expenses. Assessee pleaded to have sufficient own funds. Held: Own funds in the form of share capital and free reserves were available with assessee-company at the relevant time much more than the investments made, therefore, it could be safely presumed that investments capable of earning exempt income were entirely made by assessee-company out of its own free funds without there being utilization of interest bearing borrowed funds. Therefore, no disallowance of interest under rule 8D(2)(ii) was called for.

Followed:CIT v. Reliance Utilities and Power Ltd. (2009) 313 ITR 340 (Bom) : 2009 TaxPub(DT) 1275 (Bom-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2011-12


INCOME TAX ACT, 1961

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

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