|The Tax Publishers2020 TaxPub(DT) 4771 (Chen-Trib)
INCOME TAX ACT, 1961
Where assessee had made out a case with necessary evidence that it had interest income free funds being share capital and surplus reserve in excess of investments which yield exempt income, therefore, AO was directed to delete interest disallowances under rule 8D(2)(ii).
Disallowance under section 14A - Assessee was having interest free funds being equity share capital and free reserves - Expenditure incurred against exempted income -
Assessee had earned exempt income, however, not made any disallowance towards expenses relatable to exempt income. Assessee had also submitted the details of exempt income and had also furnished total investments. AO observed that although assessee had earned huge exempt income but had failed to disallow expenses relating to exempt income and hence, was of opinion that it was unrealistic to state that none of expenses including salary, administrative expenses can be attributable to earning of exempt income and accordingly invoked rule 8D of Income Tax Rules and determined the disallowance of interest under rule 8D(2)(ii). Held: When sufficient own fund was available, which was over and above the value of investments, then the question of disallowance of interest expenditure did not arise. Assessee's capital, profit, reserves, surplus and current account deposits were higher than the investments in tax free securities would have to be presumed that investments made by the assessee would be out of interest free funds available with assessee and no disallowance was warranted under section 14A. Assessee had made out a case with necessary evidence that it had interest income-free funds being share capital and surplus reserve in excess of investments which yield exempt income. Therefore, AO was directed to delete interest disallowances under rule 8D(2)(ii).
Relied:CIT v. HDFC Bank Ltd. (2014) 366 ITR 505 (Bom-HC) : 2014 TaxPub(DT) 3351 (Bom-HC) and ITO v. Shri Raj Kumar Kukreja (2014) 51 ITR 98 (Pat) : 1964 TaxPub(DT) 124 (Pat-HC).
FAVOUR : In assessee's favour.
A.Y. : 2012-13
INCOME TAX ACT, 1961
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