Tax-exempt investments funded from internal surplus: s.14A r.8D disallowance and forex gain disallowance both deleted.

Whether disallowance under s.14A r/w r.8D could be made where tax-exempt investments were funded from internal accruals was decided by holding that the assessee had substantial surplus own funds far exceeding the value of investments, negating any presumption of interest or administrative expenditure attributable to such investments; consequently, the estimated disallowance under r.8D was unsustainable and was deleted. Whether foreign exchange gain could be disallowed as expenditure was decided by holding that the assessee's consistent accounting treatment, including corresponding foreign exchange losses in earlier and subsequent years, had been accepted; consequently, the disallowance on account of foreign exchange gain was rightly deleted. The SLP was dismissed and the HC order was affirmed against the revenue.

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The Supreme Court dismissed the Special Leave Petition with condonation of delay. Pending applications were disposed of accordingly.

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