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September 2013

Business expenditure: Disallowance u/s. 14A: A. Y. 2005-06 and 2006-07: Investment in subsidiaries: In respect of part of investment dividends were taxable: In respect of balance, assessee had sufficient interest free funds: No disallowance could be made u/s. 14A:

By K. B. Bhujle, Advocate
Reading Time 1 mins
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CIT vs. Suzlon Energy Ltd: 354 ITR 630 (Guj):

The assessee had made investments in subsidiaries. The Assessing Officer made disallowance of interest expenditure and administrative expenditure u/s. 14A in respect of such investment. The Commissioner (Appeals) deleted the disallowance. The Tribunal found that in respect of part of investment, dividends were taxable and in respect of the balance the assessee had sufficient interest free funds of its own. The Tribunal confirmed the decision of the Commissioner (Appeal).

On appeal by the Revenue, the Gujarat High Court upheld the decision of the Tribunal and held as under:

“The Tribunal was right in law and on facts in deleting disallowance u/s. 14A in respect of interest expenses incurred for investment in subsidiaries and administrative expenses such as staff salary of corporate office, audit fees, building rent and communication expenses.”

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