Issue before tribunal:
- Whether provision of section 14A read with rule 8D can be invoked without recording any satisfaction by AO that the claim made by the assessee in respect of the expenditure incurred in relation to income which does not form part of the total income is incorrect.
- Whether interest income on funds deposited in bank supplied by Govt. for the disbursement to the employees of UPTRON India Limited under the Voluntary Retirement Scheme (VRS) can be taxed in hands of the assessee.
Brief facts:
- AO noticed that some funds was parked by the assessee in bank which was given to it by Govt. via order dated 03.04.1980. AO added interest earned on the said fund to the income of assessee.
- AO has made addition of Rs.40,31,477/- under section 14A read with rule 8D, having noticed that the assessee has shown dividend income of Rs.7,52,120/- which were exempted from tax. He accordingly computed the corresponding expenditure as per rule 8D (iii) of the rules at Rs.40,31,477/- and made addition of the same.
- On appeal CIT (A) following its earlier order rejected the ground of the assessee on interest income on parked funds in bank. Addition u/s 14A r.w.r. 8D was also sustained by him.
Contention of the revenue:
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