2023 (9) TMI 430 - ITAT BANGALORE

Disallowance u/s. 14A r.w. Rule 8D - DR submitted that the disallowance made by the AO is correct and he has recorded satisfaction that the assessee has incurred interest/indirect expenditure, therefore it cannot be said that the loan funds have not been utilized by the assessee - scope of amendment made to section 14A - HELD THAT:- The assessee has incurred interest expenditure and made investments towards earning exempt income. The assessee itself disallowed a sum suomoto as expenses attributable to investments which has yielded exempt income during the year.

The investments were made long back to the firm, M/s. Laxmi Estate and investment were made in other companies. We note from the submissions made before the CIT(Appeals) as well as AO that the assessee has not utilized borrowed funds during the impugned assessment year.

Assessee has not incurred any expenditure in order to earn exempt income. Admittedly, there is no nexus between the investment in the firm of M/s Lakshmi Estates and the borrowed funds. The AO in the order of the earlier years has also given a categorical finding that the investment in M/s Lakshmi Estates has been made out of assessee's own interest free funds. Therefore, the interest paid on borrowed funds is not attributable to the investment the firm. We do not find any infirmity in the order of the CIT(Appeals), he has passed a good and reasoned order.

Also in assessee’s own case for AY 2013-14 [2020 (2) TMI 1703 - ITAT BENGALURU] similar issue has been decided in favour of the assessee - We note that the amendment made to section 14A by Finance Act, 2022 has prospective effect which is settled in the case of PCIT v. Era Infrastructure (India) Ltd. [2022 (7) TMI 1093 - DELHI HIGH COURT] Therefore we dismiss the appeal of the revenue.