The Tax Publishers2020 TaxPub(DT) 3162 (Mum-Trib)

INCOME TAX ACT, 1961

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

Since investments from which tax-free income was earned were made out of assessee's own surplus funds/accumulated profits, therefore, disallowance under rule 8D(2)(ii) was not called for.

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

Assessee earned tax free dividend income on investments in shares but claimed no disallowance of interest expenses under section 14A. AO invoked rule 8D(2)(ii) and worked out disallowance. Assessee pleaded to have sufficent own funds.Held: A perusal of the balance sheet of assessee as at 31-3-2008 clearly indicated that shareholders+' Funds (Share Capital and Reserve and Surplus) were at Rs. 162.20 lakhs, whereas investments were at Rs. 72.58 lakhs. Accordingly, it could be safely presumed that investments from which tax-free income was earned were made out of assessee's own surplus funds/accumulated profits, and, therefore, disallowance under rule 8D(2)(ii) was not called for.

Followed:HDFC Bank Ltd. v. DCIT (2016) 67 Taxmann.com 42 (Bom) : 2016 TaxPub(DT) 1316 (Bom-HC), CIT v. HDFC Bank Ltd. (2014) 366 ITR 505 (Bom) : 2014 TaxPub(DT) 3351 (Bom-HC) and CIT v. Reliance Utilities & Power Ltd. (2009) 313 ITR 340 (Bom) : 2009 TaxPub(DT) 1275 (Bom-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2008-09


INCOME TAX ACT, 1961

Section 37(1)

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