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2022 (3) TMI 1568 - AT - Income TaxDisallowance of interest expenditure u/s 14A - expenditure incurred on earning exempt income - as argued when the assessee had sufficient interest free funds available with it, therefore, disallowance made by AO of the interest expenditure u/s.14A r.w Rule 8D(2)(ii) could not be sustained - HELD THAT:- We are of the considered view, that as stated by the AR, and rightly so, now when the assessee society had sufficient interest-free own funds available with it which would sufficiently justify the investment made in the exempt income yielding assets, therefore, no part of the interest expenditure could have validly been disallowed u/s.14A r.w Rule 8D(2)(ii). Our foresaid view is fortified by the judgment of South Indian Bank Ltd. Vs. CIT (2021 (9) TMI 566 - SUPREME COURT) as observed where interest-free own funds available with the assessee exceeded their investment in tax free securities, then, it would be presumed that investments were made by the assessee out of its own funds and no disallowance would be warranted u/s.14A r.w Rule 8D(2)(ii) of the Income Tax Rules, 1962 on the ground that separate accounts were not maintained by the assessee for investments and other expenditure incurred for earning of tax free income. Thus we are unable to persuade ourselves to sustain the disallowance of interest expenditure of Rs.3,99,790/- made by the Assessing Officer u/s.14A r.w Rule 8D(2)(ii) of the Income Tax Rules, 1962 which is accordingly vacated. TDS credit denied - As the said fact would require necessary verification, therefore, we direct the Assessing Officer to look into the aforesaid issue. In case, credit of the aforesaid amount of tax deducted at source had not been given while processing/assessing the return of income of the assessee then, the needful be done. Thus, the Ground of appeal raised in appeal by the assessee is allowed for statistical purposes.
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