Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2022 (3) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (3) TMI 1210 - AT - Income TaxDisallowance u/s 14A read with Rule 8D(2)(ii) on account of interest - As argued AO without recording any satisfaction has proceeded to make disallowance - assessee made suo motu disallowance under section 14A read with Rule 8D for earning dividend income - HELD THAT:- Assessee's specific contention was that no borrowed funds have been utilized and all the investments have been made in the earlier years from the assessee's own funds and, has not been rebutted and therefore, there was no reason for making any disallowance on account of interest. AO however without recording his satisfaction or examining the nature of investment and expenditure debited in books of account and mechanically applied Rule 8D without recording any satisfaction which is evident from the assessment order and succinctly made disallowance of expenditure of interest under Rule 8D(2) and under Rule 8D(2)(iii). CIT(A), after calling the remand report and considering the material available on record, restricted the amount of disallowance of exempt income, however, has not specifically dealt with assessee's argument how interest cost can be apportioned when assessee has used its own funds for making the investment. It is well settled proposition that if assessee has own funds which is higher than the investment for earning tax free income then presumption is drawn that all the investments in the tax free earning income has been made out of assessee's own fund. This proposition has now been approved in the case of South Indian Bank Ltd. [2021 (9) TMI 566 - SUPREME COURT] Accordingly, no disallowance of interest can be made and the same is directed to be deleted. Moreover, we find that in the earlier year also, similar finding has been given by the Tribunal. Accordingly, the appeal filed by the assessee is allowed.
|