No disallowance u/s. 14A as sufficient interest free funds available: ITAT Mumbai

Piramal Enterprises Ltd. Vs DCIT (ITAT Mumbai)

ITAT Mumbai held that no disallowance u/s. 14A of the Income Tax Act r.w.r. 8D(2)(ii) due to availability of sufficient interest free funds for the purpose of making investment in exempt income yielding assets.

Facts- Assessee has preferred the present appeal mainly contesting that CIT(A) erred in upholding the AO’s action of reducing the deduction us 80-1C of the Act by Rs. 13,63,01,000-on account of allocation of R&D Expenditure and Interest Expenditure on the alleged ground that such expenditure are attributable to the Baddi Unit.

Whereas, appeal by the Department is on a single issue towards disallowance made u/s. 14A r.w.r. 8D(2)(ii).

Conclusion- Held that Assessee has furnished certain details corroborated by documentary evidences u/r. 29 in respect of R&D expenditure allocation towards Baddi unit which needs verification since claim of the assessee has all along been that R&D expenditure incurred are mainly in the process development for customs manufacturing, which has no relation directly or indirectly with the manufacturing activity carried out at Baddi unit. In the light ofthese fresh submissions made by the assessee u/r 29 of ITAT Rules, we find it appropriate to remit the matter for limited purpose of verification to the file of ld. Jurisdictional Assessing Officer (JAO), so as to ascertain if there is any relation between the R&D expenses incurred by the assessee with the manufacturing activity carried out at the Baddi unit. Ld. Assessing Officer is directed to examine and verify to establish the nexus if any, for allocation of R&D expenses to Baddi unit and accordingly, consider the claim of the assessee in accordance with the provisions of law. Accordingly, ground raised by the assessee is partly allowed.