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2023 (11) TMI 584 - AT - Income TaxAddition u/s 14A - sufficiency of own interest-free funds or not? - as alleged assessee had paid huge interest to various persons on unsecured loans during the year under consideration - Addition made as it was not possible for the assessee to prove it’s contention that interest free funds have been utilized for making investment for the purposes earning exempt income, since, assessee was having mixed funds - CIT(A) partly allowed the appeal of the assessee by restricting the disallowance u/s. 14A of the Act to the amount of exempt income earned by the assessee - HELD THAT:- The Gujarat High Court in numerous decisions has consistently taken the position that if interest-free funds available with the assessee exceed the investments made in funds yielding exempt income, then no disallowance is called for under section 14A of the Act. In the case of Hitachi Home and Life Solutions (I) Ltd. [2013 (7) TMI 359 - GUJARAT HIGH COURT] held that where assessee's interest free funds exceeded investment made for earning exempted dividend income, disallowance under section 14A was not justified. Also in case of Gujarat Fluoro chemicals Ltd. [2020 (10) TMI 252 - GUJARAT HIGH COURT] again reiterated that where interest free funds available with assessee were far more than gross investment, it could safely be harboured that interest bearing funds was not invested by assessee and, thus, no disallowance under section 14A to be made. Thus no disallowance is called for in respect of interest expenses under section 14A of the Act, when the assessee is having sufficient interest-free funds at its disposal, in excess of investment made in instruments yielding exempt income. Decided in favour of assessee.
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