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Commissioner of Income Tax 2, Vadodara 2 Versus Shreno Ltd.

Disallowance under section 14A - computing book profit of a company under section 115JB - Held that:- If there are interest free funds available to an assessee sufficient to meet its investments and at the same time the assessee has raised a loan it can be presumed that the investments were from interest free funds available, and, accordingly, no disallowance under section 14A in respect of interest payment can be made in such a situation. S A Builders Limited Vs. Commissioner of Income Tax (App .....

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or our consideration: A. Whether on the facts and circumstances of the case and in law, the Tribunal was justified in holding that Authorities below were indeed in error in sustaining the impugned disallowance of ₹ 79.30lacs without appreciating that the A.O. had correctly made addition of ₹ 79.30 lacs in accordance with the provision of Section 14A r.w. Rule 8D of the Act? B. Whether on the facts and circumstances of the case and in law, the Tribunal was justified in directing the A .....

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omputing book profit of a company under section 115JB of the Act. 3. With respect to the first question, we may notice that the assessee had in return filed for the relevant assessment year 2008-09 had made adhoc disallowance of ₹ 1 lakh towards administrative and other expenditure for earning exempt income. The Assessing Officer however, disallowed a sum of ₹ 79.30 lakhs under section 14A of the Act with the aid of rule 8D of the Rules. This principally included the interest expendi .....

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undisputedly the interest free funds of the assessee are far in excess of the investments yielding tax exempt income, and in such a situation, as held by Hon'ble jurisdictional High Court, in the case of CIT vs. UTI Bank Limited [(2013) 32 taxmann.com 370 (Guj)], has approved the stand of this Tribunal in following the principle, laid down by Hon'ble Bombay High Court in case of CIT v. Reliance Utilities & Power Ltd. (supra), which states that if there are interest free funds availab .....

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ome was wrong. That being the position as held by this Court in number of occasions including judgments in case of Deputy Commissioner of Income Tax Vs. Vasco Sales & Marketing Corpn. reported in 66 taxmann.com 366 relying upon the judgment of the Supreme Court in case of S A Builders Limited Vs. Commissioner of Income Tax (Appeals), Chandigarh reported in 288 ITR 1, disallowance under section 14A would not be permissible. We do not find that the Tribunal has committed any error. 6. In view .....

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