Case Law Details
Sarva Haryana Gramin Bank Vs ACIT (ITAT Delhi)
ITAT Delhi held that proportionate disallowance of interest is not warranted, under Section 14A of Income Tax Act for investments made in tax free bonds or securities which yield tax free dividend and interest.
Facts-
AO noted that assessee has made investment in tax free bonds/debentures, mutual funds, shares etc. which yielded tax free dividend and tax-free interest and exempted long term capital gain totaling to Rs.3,87,57,264.25. That against this exempted income, the assessee has made disallowance of expenses under Section 14A of the Income Tax Act amounting to Rs. 18,69,824/-. AO enquired about the computation of disallowance under Section 14A. After the submissions of the computation by the assessee, AO was not satisfied. He proceeded to invoke the provisions of Rule 8D of the Income Tax Rules, 1962 and made disallowance under Section 14A read with Rule 8D(2)(ii) amounting to Rs. 2,27,55,202/- and under Rule 8D(2)(iii) amounting to Rs. 22,32,490/-.
CIT(A) was of the opinion that AO has rightly invoked the provisions of section 14A and computed the disallowance as per Rule 8D and that there is no anomaly in the order of the AO. Being aggrieved, the present appeal is filed.
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