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1 - 7 of 7 (0.27 seconds)The Companies Act, 1956
The Commissioner Of Income Tax vs Smt.Leena Ramachandran on 14 June, 2010
10. On the contrary, Ms. Jayanthi Krishnan, the Ld.
Departmental Representative, submitted that for making investment,
the assessee has to necessarily incur expenditure on overheads.
The assessee has to incur substantial expenditure for taking a
managerial decision for making investments in mutual funds and the
shares of the subsidiary companies. Therefore, the CIT(Appeals)
found that Section 14A read with Rule 8D is mandatory. The
assessee has generated income by making various investments,
10 I.T.A. Nos.1340 & 1341/Mds/15
I.T.A. Nos.1577 to 1579/Mds/15
including the investments in sister concerns. Therefore, the
administrative expenses incurred by the assessee has to be
disallowed as per the procedure prescribed in Rule 8D(iii). The
Assessing Officer similarly disallowed proportionate interest
expenses by following the procedure prescribed in Rule 8D(ii) of the
Income-tax Rules, 1962. Placing her reliance on the judgment of
Kerala High Court in CIT v. Smt. Leena Ramachandran (2011) 339
ITR 296, the Ld. D.R. submitted that any expenditure incurred for
earning income which was not taxable under the Act cannot be
allowed while computing the taxable income. Referring to Section
10(33) of the Act, the Ld. D.R. pointed out that dividend income was
exempt from taxation. The dividend earned by the assessee on the
shares acquired by it with borrowed funds did not constitute part of
the total income. Therefore, the assessee has to necessarily
disallow the expenditure incurred for earning the income which does
not form part of total income.
Section 36 in The Income Tax Act, 1961 [Entire Act]
Section 37 in The Income Tax Act, 1961 [Entire Act]
Section 30 in The Income Tax Act, 1961 [Entire Act]
S. A. Builders Ltd. .. Petitioner vs Commissioner Of Income Tax (Appeals) ... on 14 December, 2006
When the assessee has sufficient
share capital, reserves and surplus, this Tribunal is of the
considered opinion that there cannot be any disallowance towards
the interest paid on the borrowed funds under Section 14A of the
Act. For the purpose of disallowing interest income under Section
14A read with Rule 8D, there should be nexus between the
borrowed funds and investment made by the assessee in the share
capital and mutual funds. In the absence of any nexus, the
12 I.T.A. Nos.1340 & 1341/Mds/15
I.T.A. Nos.1577 to 1579/Mds/15
presumption is that the assessee has invested the available
interest-free funds in share capital and mutual funds. Furthermore,
making investment in sister concerns is for commercial expediency
in view of the judgment of Apex Court in S.A. Builders Ltd. v. CIT
(2007) 288 ITR 1. It is not the case of the Revenue that the sister
concern or any of the Directors has misused the funds invested by
the assessee. When the sister concern uses the funds only for
business purpose, there was commercial expediency for making
investment. Therefore, this Tribunal is of the considered opinion
that there cannot be any disallowance under Section 14A of the Act
read with Rule 8D of the Income-tax Rules, 1962.
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