A B T LIMITED,COIMBATORE vs. DCIT, CENTRAL CIRCLE-1, COIMBATORE

The sole issue in the captioned appeal is disallowance u/s 14A. The Ld. AR advanced arguments to submit that own funds far exceeded the investment made by the assessee. The Ld. AR also submitted that disallowance u/r 8D(2)(iii) should be computed by considering exempt income yielding investments only. The Ld. Sr. DR submitted that the disallowance has already been restricted to the extent of exempt income earned by the assessee which is quite reasonable. Having heard rival submissions and upon perusal of case records, the appeal is disposed- off as under.

The assessee earned exempt income of Rs.93.28 Lacs and offered suo-motu disallowance of 1% against the same. However, not satisfied with the correctness of the claim, Ld. AO applied Rule 8D(2) and computed disallowance of Rs.284.64 Lacs which was interest disallowance u/r 8D(2)(ii) for Rs.259.34 Lacs and indirect expense disallowance u/r 8D(2)(iii) for Rs.25.30 Lacs. The Ld. CIT(A), considering assessee’s submissions, restricted the impugned disallowance to the extent of exempt income earned by the assessee. Aggrieved, the assessee is in further appeal before us. 3. We are of the considered opinion that in case the own funds of the assessee are quite sufficient to meet the investments made by the assessee then in such a case, unless nexus of borrowed funds vis-à-vis investment is establish by Ld. AO, a presumption would arise in assessee’s favor that the investments were funded out of own funds. In such a case, the interest disallowance is not called for. Since the assessee has placed on record its financial statements to support its submissions, we direct Ld. AO to verify the aforesaid facts and re- adjudicate the issue of interest disallowance. The indirect expense disallowance would be restricted considering exempt income yielding investments only. 4. The appeal stand partly allowed in terms of our above order. Order pronounced on 05th December, 2023. Sd/- Sd/- (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) उपा34 / VICE PRESIDENT लेखा सद6 / ACCOUNTANT MEMBER चे8ई Chennai; िदनांक Dated : 05-12-2023 DS आदेशकीAितिलिपअ&ेिषत/Copy of the Order forwarded to : 1. अपीलाथ�/Appellant 2. � थ�/Respondent 3. आयकरआयु@/CIT 4. िवभागीय�ितिनिध/DR 5. गाडEफाईल/GF