2024 (12) TMI 108 - AT - Income Tax

Disallowance u/s 14A r.w.r. 8D - Assessee had claimed dividend income as exempt u/s 10 of the Act and no suo moto disallowance was made by the Assessee against this exempt income - basis and foremost contention of Ld. AR is that as the Assessee had sufficient surplus funds available which is evident from the financial statements of the Assessee and the Assessee had not made any fresh investment, no disallowance can be made HELD THAT - There are no long term borrowings and short term borrowings. Then there is no change in non-current and current Investments in the impugned AY. It is settled proposition of law that if own funds are sufficient to meet the amount of investment yielding the exempt income, then a presumption would arise that the investment was made out of the own funds available with the assessee. Reliance is rightly placed on decisions in South Indian Bank Ltd. 2021 (9) TMI 566 - SUPREME COURT , Godrej Boyce Manufacturing Company Ltd. 2017 (5) TMI 403 - SUPREME COURT and Sintex Industries Ltd. 2018 (3) TMI 1448 - SC ORDER Assessee appeal allowed.

Summary

The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals) regarding disallowance of exempt income. The Assessee, a registered broker under SEBI, had claimed dividend income as exempt. The AO made a disallowance under Section 14A read with Rule 8D. The CIT (A) partially allowed the appeal, restricting the disallowance to the exempt income. The Assessee argued that no disallowance should be made as it had sufficient surplus funds available and had not made any fresh investment. The Tribunal agreed with the Assessee, citing relevant case laws, and allowed the appeal.