S. 14A & Rule 8D(2)(ii): Interest incurred on taxable income has also to be excluded to avoid incongruity & in view of Department’s stand before High Court

ACIT vs. Champion Commercial Co Ltd (ITAT Kolkata)

The Tribunal had to consider two issues on s. 14A & Rule 8D: (i) whether the AO has to record a specific satisfaction that the claim of the assessee that it has not incurred any expenditure on earning tax exempt dividend is incorrect & (ii) whether in view of the definition of variable ‘A’ embedded in the formula under Rule 8D(2)(ii), interest expenditure directly related to taxable income has also to be excluded even though it is not specifically referred to. HELD by the Tribunal: