Whether interest expenditure attributable to a taxable business can be disallowed u/s. 14A/ Rule 8D and whether expenditure on creating assets which do not belong to the assessee is revenue expenditure?

Last updated: 25 November 2014

Court :
Allahabad High Court

Brief :
Questions of law raised were(1) Whether the Tribunal erred in law in deleting the addition made on account of disallowance u/s 14A read with Rule 8D, without appreciating the language and provision of these Sections, more so when the expenditure was with respect to amount of interest expenses which wasdirectly attributable to dividend income and which did not form part of total income;(2) Whether the Tribunal erred in law in deleting the addition made u/s 36(1)(iii) ignoring the fact that the assessee was not charging interest on funds given as loans and advances to its sister concerns/subsidiaries when there was no specific business purpose for which these interest free loans and advances were given;(3) Whether the Tribunal erred in law and fact in deleting the disallowance made by the AO on account of expenses incurred on transmission lines and contribution paid to the Uttar Pradesh Power Corporation Limited4, without appreciating the fact that, these expenses were in the nature of capital expenditure as they were for providing enduring benefits to the assessee and would remain an asset with the assessee for indefinite period, hence these were not deductible as per the provisions of Section 37 (1) of the Act.

Citation :
Additional Commissioner Of Income Tax – Appellant – Versus - M/S Dhampur Sugar Mill Pvt. Ltd. – Respondent