Case Law Details
ACIT Vs Bajaj Resources Ltd (ITAT Delhi)
Conclusion: Disallowance could not be made on interest for earning exempt income under section 14A as assessee had available, non-interest-bearing funds larger than the investments made in tax- free securities.
Held: During the course of scrutiny assessment proceedings, AO noticed that assessee had claimed exemption in respect of dividend income of Rs. 62,07,50,000/- and profit in LLP of Rs. 198 crores. AO found that no expenditure in relation to exempt income was disallowed by assessee u/s 14A. Assessee had sufficient own interest free funds to make investments and, therefore, there was no question of investment made out of borrowed funds. Assessee further contended that though it had incurred interest cost of Rs. 31 lakhs but had also earned interest income of Rs. 589.63 lakhs and further earned income of Rs. 136.09 lakhs as short term capital gain. It was held that if investments in securities was made out of common funds and assessee had available, non-interest-bearing funds larger than the investments made in tax- free securities then in such cases, disallowance under Section 14A could not be made. Thus, there could not be any disallowance of interest for earning exempt income.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by the Revenue is preferred against order of the Commissioner of Income Tax [Appeals] – 1, Hyderabad dated 18.12.2017 pertaining to Assessment Year 2014-15.
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