No disallowance under section 14A can be made if assessee has not incurred and claimed any expenditure on exempt income

Last updated: 03 January 2013

Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
Facts in brief:- The assessee is a Private Limited Company. It filed its return of income on 26.9.2009 declaring a loss of Rs.26,498/-. The assessee company had dividend income of Rs.41,82,220/-, which claimed as exempt under Section 10(34) of the Income Tax Act, 1961. The only other income assessee had was bank interest of Rs.19,941/-. The assessee capitalized the interest expenditure and had not claimed the same as an expense either in the Profit & Loss a/c or in its income tax computation. The Assessing Officer made a disallowance under Section 14A read with Rule 8D on an amount of Rs.45 lakhs being interest paid to ICICI bank on purchase of shares of Uflex Ltd. and a further amount of Rs.6,51,918/- being ½% of average investment under Rule 8D(2).

Citation :
Modern Info Technology P.Ltd. 305, 3rd floor, Bhanot corner Pamposh Enclave, GK I New Delhi (Appellant) Vs.ITO, Ward 5(4)New Delhi(Respondent)