The Tax Publishers2020 TaxPub(DT) 4708 (Mum-Trib) : (2021) 187 ITD 0125

INCOME TAX ACT, 1961

Section 14A

Rule 8D was applicable for concerned assessment year 2009-10 but for the purpose of working out the disallowance under rule 8D(2)(ii), amount of expenditure by way of interest would be interest paid by assessee on borrowings minus taxable interest earned during the year.

Disallowance under section 14A - Expenditure against exempt income - Interest expenses under rule 8D(2)(ii) -

Assessee, non-resident, received tax-free interest income from Indian branch but claimed no disallowance under section 14A. AO invoked rule 8D(2) and disallowed interest and administrative expenses. Assessee contended that de hors any investment made for earning of interest income from its HO no disallowance was called for under section 14A read with rule 8D(2). Held: There was no substance in assessee's contention taking cognizance of the fact that from assessment year 2008-09 onwards, disallowance under section 14A was to be computed in accordance with rule 8D. AO rightly invoked rule 8D(2). But, for the purpose of working out the disallowance under rule 8D(2)(ii), amount of expenditure by way of interest would be interest paid by assessee on borrowings minus taxable interest earned during the year.

Relied:CIT, Central-III v. Jubiliant Enterprises Pvt. Ltd. [ITA No. 1512 of 2014, dated 28-2-2017] : 2018 TaxPub(DT) 5738 (Bom-HC) and Pr. CIT-3 v. Nirma Credit and Capital (P.) Ltd. (2018) 300 CTR (Guj) 286 : 2017 TaxPub(DT) 4021 (Guj-HC).

REFERRED :

FAVOUR : Partly in assessee's favour.

A.Y. : 2009-10


INCOME TAX ACT, 1961

Section 44C

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