The Tax PublishersITA Nos. 6486, 6637/Mum/2018
2021 TaxPub(DT) 0458 (Mum-Trib)INCOME TAX ACT, 1961
Section 14A Rule 8D(2)(ii)
Once sufficient own funds are available with the assessee for making investments, then there cannot be any disallowance of interest under rule 8D(2)(ii), even though the same was erroneously made by the assessee in the return of income. Accordingly, the disallowance sustained by CIT(A) under section 14A read with rule 8D(2)(ii), even though voluntarily made by assessee in the return of income, was liable to be deleted.
|
Disallowance under section 14A - Expenditure against exempt income - Assessee made suo moto disallowance - AO made disallowance over and above the suo moto disallowance---Assessee having sufficient interest free funds
AO made suo moto disallowance under section 14A read with rule 8D(2)(ii). AO was not satisfied with the said disallowance and accordingly, he made disallowance under section 14A read with rule 8D(2)(ii) over and above the suo moto disallowance made by assessee. CIT(A) upheld the suo moto disallowance made by the assessee and directed AO to delete the balance disallowance. However, assessee submitted before the Tribunal that it had sufficient own funds and hence, there could not be any disallowance of interest under rule 8D(2)(ii). Held: It was undisputed that assessee was having sufficient own funds in the form of share capital and reserves and surplus at the beginning and close of the year as against total non-current investments and current investments as at the beginning and close of the year. It is settled that if interest free funds available with the assessee is more than the investments which had actually yielded exempt income, then the general presumption that such investments were made out of interest-free funds and not out of borrowed funds, would prevail. Accordingly, there could not be any disallowance of interest under rule 8D(2)(ii). Further, it is also settled that once sufficient own funds are available with assessee for making investments, then there cannot be any disallowance of interest under rule 8D(2)(ii), even though the same was erroneously made by assessee in the return of income. Accordingly, the disallowance sustained by CIT(A) under section 14A read with rule 8D(2)(ii) even though voluntarily made by assessee in the return of income, was deleted.
Followed:PCIT v. Shapoorji Pallonji & Co. Ltd. (2020) 423 ITR 220 (Bom) : 2020 TaxPub(DT) 1624 (Bom-HC) Pr. CIT v. Sintex Industries Ltd. (2017) 82 taxmann.com 171 (Gujarat) : 2017 TaxPub(DT) 1707 (Guj-HC), HDFC Bank Ltd. v. DCIT & Ors. (2014] (49 taxmann.com 335) (Bom.) : 2014 TaxPub(DT) 3351 (Bom-HC), CIT v. Reliance Utilities & Power Ltd. (2009) 313 ITR 340 (Bom.) : 2009 TaxPub(DT) 1275 (Bom-HC) and Pr. CIT v. Sintex Industries Limited (2018) 255 Taxman 171 (SC) : 2018 TaxPub(DT) 1574 (SC).
REFERRED :
FAVOUR : In assessee's favour
A.Y. : 2013-14
INCOME TAX ACT, 1961
Section 14A read with Rule 8D(2)(iii)
 SUBSCRIBE FOR FULL CONTENT
|