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TMI Blog2019 (7) TMI 1206X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The common issue for consideration in both these appeals is with regard to disallowance made by the AO of the expenses incurred in earning income which does not form part of the total income under Chapter III of the Income-tax Act,1961 ['the Act' for short] in accordance with provisions of section 14A of the Act r.w. rule 8(D)(2)(ii) and 8D(2)(iii) of the Income Tax Rules. 1962 ('the Rules' for short). 3. The assessee is a company engaged in the business of manufacturing and trading in electronic goods. In the course of assessment proceedings u/s 143(3) of the Act, the AO noticed that the assessee had claimed exemption in respect of dividend income from shares and mutual funds u/s 10(34) of the Act of a sum of Rs. 84,83,798/-. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee preferred an appeal before the CIT(A). The CIT(A) upheld the order of the AO in principle. But held that expenditure that should be disallowed u/s 14A of the Act cannot exceed the exempt income and accordingly directed the AO to restrict the addition u/s 14A of the Act to the extent of exempt income earned by the assessee during the previous year. 7. Aggrieved by the order of the CIT(A) confirming the addition made u/s 14A of the Act to the extent of exempt income earned by the assessee, the assessee has preferred the present appeal before the Tribunal. Aggrieved by the order of the CIT(A) in not sustaining the addition made by the AO, Revenue preferred an appeal before the Tribunal. 8. We have heard rival submissions and perus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d investments in non-yielding instruments have remained same from 31/3/2008. It can therefore be safely presumed that the assessee had own surplus funds which were more than investments in dividend yielding shares. The law by now is well-settled that if available interest-free funds are much more than investments in dividend yielding shares, then there can be no disallowance under rule 8D(2)(ii) of the Act. In the case of CIT Vs. HDFC Bank Ltd. [2014] 49 taxmann.com 335 (Bombay) it was held where assessee's own funds and other non interest bearing funds were more than investment in tax free securities, no disallowance of part of interest payments under section 14A of the Act can be made. In light of the above factual and legal position, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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