2016 (12) TMI 801

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..... . 4,87,77,924/- under Section 14A of the Income-tax Act, 1961 (in short "the Act"). 3. Shri R. Vijayaraghavan, the Ld.counsel for the assessee, submitted that the assessee earned dividend income of Rs. 27,02,66,864/- and claimed the same as exempt under Section 10(34) of the Act. The Assessing Officer found that the assessee has not incurred any expenditure for earning the exempt income. According to the Ld. counsel, the investments were made out of the assessee's own funds. The assessee had its own funds as on 31.03.2010 at Rs. 130,342.43 lakhs and as on 31.03.2011, the available funds with the assessee was Rs. 170,654.87 lakhs. The assessee has also generated cash surplus to the extent of Rs. 39,633.28 lakhs and a portion of this amount .....

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..... According to the Ld. D.R., the Assessing Officer found that the assessee has not claimed any expenditure for earning of exempt income. By considering the volume of portfolio of investment, the Assessing Officer found that the assessee should have incurred expenditure in the form of managerial, administrative and monitoring purpose. According to the Ld. D.R., the Assessing Officer categorically recorded a finding that he is not satisfied with the explanation of the assessee that no expenditure was incurred. Accordingly, he computed the disallowance under Section 14A of the Act read with Rule 8D of Income-tax Rules, 1962. According to the Ld. D.R., the Assessing Officer found that there was no direct expenditure incurred by the assessee for .....

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..... . In other words, when the borrowed funds mixed with the assessee's own funds, it cannot be identified from which part of funds the investment was made. In other words, when the interest paid by the assessee on the funds borrowed for business is not relatable to any particular item of income, this Tribunal is of the considered opinion that the second limb of Rule 8D(2) would come into operation. In other words, the disallowance has to be computed under Rule 8D(2)(ii) of Income-tax Rules, 1962. 7. We have carefully gone through the decision of this Tribunal in Tamilnadu Power Finance & Infrastructure Development Corporation Ltd. (supra). In the case before this Tribunal in Tamilnadu Power Finance & Infrastructure Development Corporation Ltd .....

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