Section 14A disallowance – Revenue cannot dictate assessee that how the assessee should use its own fund

CIT Vs. Gujarat Power Corporation Ltd. (Gujarat High Court)

Assessee is fully justified in arranging its affairs in such a manner where his tax liability is reduced provided the assessee does not resort to any illegal means or enter into a sham transaction for the said purpose. It is the prerogative of the assessee to use its own fund in the manner in which it considers proper. The Revenue cannot dictate the assessee that how the assessee should use its own fund. Thus in our considered opinion the A.O.’s approach in the instant case was not justified. The nexus between the interest bearing fund and interest free investment as claimed by the A.O. was not correct when it is not in dispute that the own funds were utilized for making tax free investment.