INCOME TAX ACT, 1961

Section 14A

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 investments in shares. AO invoked rule 8D(2)(ii) and disallowed interest expenses. Assessee pleaded to have sufficient own funds. Held: On perusal of the financial statements of assessee, it was clear that as on 31-3-2012, it had self-owned/interest free funds aggregating to Rs. 23,78,16,054 available with it, viz. (i) share capital: Rs. 9,00,00,000; and (ii) Reserves and Surplus Rs. 14,78,16,054, as against the aforesaid interest-free funds of Rs. 23,78,16,054, the exempt income yielding shares held by the assessee as on 31-3-2012 amounted to Rs. 1,50,10,109. Thus, it could be safely presumed that investments were made out of sufficient own funds available with assessee and accordingly, no disallowance of interest expenditure was called for under section 14A.

Relied:South Indian Bank Limited v. CIT Civil Appeal Nos. 9606, 9609, 9610, 9611, 9615 of 2011, dated 9-9-2021 : 2021 TaxPub(DT) 5150 (SC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2012-13

INCOME TAX ACT, 1961

Section 14A

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