2014 (6) TMI 185 - GUJARAT HIGH COURT

Disallowance u/s 14A r.w. Rule 8D of the Act - Bifurcation of expenses – Held that:- The assessee was having shareholding funds and the investment - the assessee had sufficient funds for making the investments and it has not used the borrowed funds - there is nothing on record to indicate that there has been any actual expenditure incurred by the assessee for earning tax-free income of ₹ 14 crores – Relying upon CIT v. Suzlon Energy Ltd. [2013 (7) TMI 697 - GUJARAT HIGH COURT] - the Tribunal has rightly bifurcated the expenditure in two parts-first related to investment in foreign subsidiaries - the dividend income from such subsidiaries is taxable in India and that therefore, section 14A would have no applicability - The remaining amount pertain to investment of ₹ 38 crores-(rounded off) made in Indian subsidiaries - the assessee had to its disposal, own interest-free funds many times over the investment - it clearly emerges from the material on record that no expenditure was incurred for earning the exempted income and that being the question of fact, the disallowance of 1 percent of interest expenditure artificially or on the basis of assumption rightly has not been sustained by the Tribunal – Decided against Revenue.