Rule 8D not applied unless there is proper nexus between borrowed fund and investment

Last updated: 19 September 2012

Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
This only issue in this appeal of assessee is against the order of CIT(A) in confirming the disallowance of interest expenditure by invoking the provisions of section 14A of the Act read with Rule 83(2)(ii) of the Income-tax Rules, 1962 (hereinafter referred to as the “Rules”) and also Rule 8D(3) of the Rules at Rs.1,02,59,650/-. For this, assessee has raised following three effective grounds: “1. For that on the facts and in the circumstances of the case and in law, the CIT(A) erred in upholding the disallowance of Rs.1,08,65,937/- u/s. 14A read with Rule 8D under the I. T. Act, 1961. 2. For that on the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to correctly appreciate the details and explanations furnished by the assessee in support of the claim that no expenditure had been incurred in relation to earning exempt income in terms of Section 14A of the Act and without assigning cogent reasons upheld the disallowance made by the AO. 3. For that on the facts and in the circumstances of the case and in law, the disallowance u/s. 14A of the I. T. Act be deleted and/orreduced.”

Citation :
Hindusthan Paper Corporation Ltd. (PAN: AAACH9463K) (Appellant) Vs. Deputy Commissioner of Income-tax Circle-5, Kolkata. (Respondent)