Agrasen Engineering Industries Pvt. Ltd Vs National E-Assessment Centre (ITAT Jaipur)
ITAT Jaipur held that the assessee has sufficient amount of interest free fund to make investment yielding exempt income, therefore, disallowance under section 14A of the Income Tax Act not justified. Accordingly, appeal of assessee allowed.
Facts- The assessee company derives income from manufacturing and job work of automobile components. While conducting the proceeding of making the assessment, ld. AO noted from the balance sheet of the assessee that the assessee had made investments in equities shares amounting to Rs. 27,00,23,608/-. AO also observed that such an investment would generate exempt income in the form of dividend income. Additionally, the managerial/administrative cost for arranging such a type of investment cannot be denied.
Notably, appellant-assessee earned exempt income i.e. dividend of Rs. 8,55,037/-. Accordingly, AO made disallowance u/s. 14A of Rs. 23,20,009/-. CIT(A) partly allowed the appeal. Being aggrieved, the present appeal is filed.
Conclusion- Held that Assessing Officer failed to appreciate that the assessee has sufficient amount of interest free fund in the form of capital to make investment yielding exempt income, therefore, addition under section 14A of the Act did not get attract. As is clear from the fact that assessee made total investments of Rs. 27,06,23,113/- as against that shareholder fund and reserve and surplus as per Note No. 2 & 3 of the audited financial statement as on 31/03/2018 is Rs. 67,14,10,652/- which is more than total investment in equity shares as on 31/03/2018 is of Rs 27,06,23,112/-. Thus, shareholder fund is sufficient to make investment.
