The Tax Publishers2021 TaxPub(DT) 0056 (Bang-Trib)

INCOME TAX ACT, 1961

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

Even in a situation where investments are from common pool, if non-interest-bearing funds are more than the investments in tax-free securities, no disallowance can be made under section 14A read with rule 8D(2)(ii) of proportionate interest.

Disallowance under section 14A - Expenditure against exempt income - Disallowance of interest -

Assessee filed appeal against the order of CIT(A) wherein it was held that assessee had not maintained separate books of account and outflow was from the common pool and made disallowance of proportionate interest under rule 8D(2)(ii) read with section 14A. Held: On perusal of financials of assessee, it was clear that the interest free funds in possession of the assessee far exceeded the investments made during the current year and even in the immediately preceding assessment year. Further, in case of CIT v. Microlabs Ltd [(2016) 383 ITR 490 (Kar.) : 2016 TaxPub(DT) 2372 (Karn-HC)] it was held that even in a situation where investments are from common pool, if non-interest bearing funds are more than the investments in tax free securities, no disallowance can be made under section 14A read with rule 8D(2)(ii) of proportionate interest. Following the same, disallowance made under section 14A read with rule 8D(2)(ii) was required to be deleted.

Followed:CIT v. Microlabs Ltd. [(2016) 383 ITR 490 (Karn-HC) : 2016 TaxPub(DT) 2372 (Karn-HC)].

REFERRED :

FAVOUR : In favour of assessee.

A.Y. : 2016-2017


INCOME TAX ACT, 1961

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

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