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2016 (2) TMI 928 - ITAT CHENNAIAddition u/s 14A - sufficiency of funds - Held that:- When the assessee has sufficient share capital, reserves and surplus, this Tribunal is of the considered opinion that there cannot be any disallowance towards the interest paid on the borrowed funds under Section 14A of the Act. For the purpose of disallowing interest income under Section 14A read with Rule 8D, there should be nexus between the borrowed funds and investment made by the assessee in the share capital and mutual funds. In the absence of any nexus, the presumption is that the assessee has invested the available interest-free funds in share capital and mutual funds. Furthermore, making investment in sister concerns is for commercial expediency in view of the judgment of Apex Court in S.A. Builders Ltd. v. CIT (2006 (12) TMI 82 - SUPREME COURT ) . It is not the case of the Revenue that the sister concern or any of the Directors has misused the funds invested by the assessee. When the sister concern uses the funds only for business purpose, there was commercial expediency for making investment. Therefore, this Tribunal is of the considered opinion that there cannot be any disallowance under Section 14A of the Act read with Rule 8D of the Income-tax Rules, 1962. - Decided in favour of assessee
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