No S. 14A/ Rule 8D Disallowance For Specific Loans: ITAT Chennai

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ACIT vs. Best & Crompton Engineering Ltd (ITAT
Chennai)<http://itatonline.org/archives/?p=7025>

*S. 14A/ Rule 8D: Interest on loans for specific taxable purposes to be
excluded
*

In AY 2009-10, the assessee contended that in computing the disallowance to
be made u/s 14A and Rule 8D(2)(ii), the interest on bank loans and term
loans taken for specific taxable purposes had to be excluded. The AO
rejected the claim though the CIT(A) accepted it. On appeal by the
department to the Tribunal, HELD:

Rule 8D(2)(ii) refers to expenditure by way of interest which is not
directly attributable to any particular income or receipt. If loans have
been sanctioned for specific projects/expansion and have been utilized
towards the same, then obviously they could not have been utilized for
making any investments having tax-free incomes and have to be excluded from
the calculation to determine the disallowance under Rule 8D(2)(ii) (*Champion
Commercial Co. Ltd<http://itatonline.org/archives/index.php/acit-vs-champion-commercial-co-ltd-itat-kolkata-s-14a-rule-8d2ii-interest-incurred-on-taxable-income-has-also-to-be-excluded-to-avoid-incongruity-in-view-of-departments-stand-before-high-c/>
* (ITAT Kol) followed)

*Note*: In *Champion Commercial
Co<http://itatonline.org/archives/index.php/acit-vs-champion-commercial-co-ltd-itat-kolkata-s-14a-rule-8d2ii-interest-incurred-on-taxable-income-has-also-to-be-excluded-to-avoid-incongruity-in-view-of-departments-stand-before-high-c/>
* it was held that though the words in Rule 8D(2)(ii) are rigid, they had
to be modified in view of the stand taken by the revenue before the Bombay
High Court in *Godrej & Boyce Mfg
Co<http://itatonline.org/archives/index.php/godrej-boyce-vs-dcit-bombay-high-court-rule-8d-r-w-s-14a-2-is-not-arbitrary-or-unreasonable-but-can-be-applied-only-if-assessees-method-not-satisfactory-rule-8d-is-not-retrospective-and-applies/>
* 328 ITR 81 that any expenditure by way of interest which is directly
attributable to any particular income or receipt would be excluded.

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