Quick Summary
When the assessee's own funds exceed the investments, a presumption can be drawn that the investments were made out of the assessee's own funds and no proportionate disallowance is warranted under Section 14A of Income Tax Act 1961 (ITA'61). Disallowance of expense under Section 14A of Income Tax Ac
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FAQ :
Section 14A of the Income Tax Act, 1961, states that no deduction shall be allowed in respect of expenditure incurred by an assessee in relation to income which does not form part of the total income.
Disallowance under Section 14A is not justified when the assessee possesses ample own funds to make the investments, as confirmed by the ITAT Ahmedabad.
The ITAT Ahmedabad decision relies on judgments from the Supreme Court in the case of South Indian Bank Limited and the Delhi High Court in the case of Cargo Motors (P.) Limited.
No, disallowance under Section 14A should only be based on investments that yield exempt income during the year, not the total investments made by the assessee.
If an assessee's own funds exceed their investments, a presumption can be drawn that the investments were made from these own funds, negating the need for proportionate disallowance under Section 14A.
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