2022 (4) TMI 20

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....e 'Act'). 2. The sole issue raised in this appeal is regarding the validity of the disallowance made/confirmed by the lower authorities u/s 14A r.w. Rule 8D(2)(ii) and 8D(2)(iii) of the I.T Rules on account of expenditure incurred for earning of tax exempt income. 3. So far as the disallowance u/s 14A of the Act r.w. Rule 8D(2)(ii) of the I.T. Rules is concerned, the ld. Counsel for the assessee has submitted that the assessee had sufficient owned funds to meet the investments. He, in this respect, has relied upon the balance sheet of the assessee for the year under consideration to submit that the assessee had share capital of Rs. 5.86 crores and reserve and surplus of Rs. 77.91 crores as on 31.03.2013 and these were share capital of....

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.... sufficient interest free own funds which were more than the investments made" The Hon'ble Supreme Court after detailed discussion on the issue has finally answered the aforesaid questions in favour of the assessee and against the Revenue holding that the proportionate disallowance of interest is not warranted under Section 14A of Income Tax Act for investments made in tax free bonds/ securities which yield tax free dividend and interest to Assessee Banks in those situations where, interest free/own funds available with the Assessee, exceeded the investments. Further reliance in this case can also been placed on the decision of the Hon'ble Supreme Court in the case of Hero Cycle (P) Ltd. Vs. CIT 379 ITR 347 (SC) and also the decision of ....