The Tax Publishers2015 TaxPub(DT) 2630 (Luck-Trib) : (2015) 155 ITD 0001

 

Jt. CIT(OSD)/Dy. CIT v. Super House Leather Ltd.

 

INCOME TAX ACT, 1961

--Disallowance under section 14A--Expenditure against exempt incomeApplicability of rule 8D--Held: In the case of Godrej & Boyce Mfg. Co. Ltd. v. DCIT & Anr. (2010) 328 ITR 81 (Bom), it was held that rule 8D is prospective and therefore, applicable from assessment year 2008-09 and afterwards. Therefore, rule 8D is not applicable in the present year. At the same time, even prior to assessment year 2008-09 from when Rule 8D is applicable, some reasonable disallowance has to be made under section 14A. CIT(A) had confirmed the disallowance of Rs. 12,000. However, the disallowance of Rs. 12,000 for average investment of Rs. 491.08 lac was not reasonable and therefore, disallowance should be made of Rs. 50,000 on account of administrative expenses. Regarding deletion of disallowance of interest expenditure under section 14A, it was held by CIT(A) that as per judgment of Bombay High Court in the case of CIT v. Reliance Utilities and Power Ltd. (2009) 313 ITR 340 (Bom), when mixed funds were used for making investment, there should be presumption that the investments were made out of interest-free funds. Prior to applicability of Rule 8D, the disallowance deleted by CIT(A) on account of interest expenditure on this basis that the interest-free funds were sufficient to cover the investment, no interference was called for in the order of CIT(A).

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