By C. N. Vaze
Shailesh Kamdar
Jagdish T. Punjabi
Bhadresh Doshi
Chartered Accountants
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6. (2013) 153 TTJ 181 (Mumbai)
ITO vs. Strides Arcolab Ltd.
ITA No.6487 (Mum.) of 2004
A.Y.2001-02. Dated 03-08-2012
Sections 14A read with section 2(22A) of the Income Tax Act, 1961 – Interest in relation to investment in shares of foreign companies not to be disallowed u/s. 14A.
FactsFor the relevant assessment year, the Assessing Officer made disallowance u/s. 14A in respect of interest on investment in shares on which assessee had earned dividend income which was claimed as exempt/s.10(33). The CIT(A), inter alia, held that only the dividend income received from a domestic company is exempt u/s. 10(33) [this was the section during A.Y.2001-02 – now it is section 10(34)]. Therefore, interest in respect of assessee’s investment in shares of foreign companies was not liable to be considered u/s. 14A.
Held
The Tribunal upheld the CIT(A)’s order in respect of the above matter. The Tribunal noted as under :
1. Section 10(33), at the material time, exempted, inter alia, dividend referred to in section 115-O from the purview of taxation. Section 115-O talks of a `domestic company’.
2. On perusal of the definition of `domestic company’ u/s. 2(22A), it transpires that it is only Indian company or any other company, which has, in respect of its income is liable to tax under this Act, made prescribed arrangement for the declaration and payment of dividend. Obviously, this definition does not extend to foreign companies.
3. Therefore, the disallowance u/s. 14A is conceivable only in respect of investment made in the shares of domestic companies and not foreign companies.
