In CIT v. Jubiliant Enterprises Pvt. Ltd, the division bench of the Bombay High Court confirmed that the disallowance of interest under Section 14A of the Income Tax Act should be made with reference to net interest loan.
The Revenue approached the High Court against the order of the appellate Tribunal wherein the Tribunal held that the disallowance made under Section 14A read with Rule 8D on the basis of the netting of interest. It was contended on behalf of the Revenue that the disallowance must be on the basis of gross revenue.
The bench noted that the decision of the Tribunal was on the basis of its Coordinate bench at Mumbai in case of Paresh K. Shah and the decision of its Calcutta Bench in Trade Apartments Ltd. “Mr. Kotangale, the learned counsel appearing for the Revenue is unable to point out whether the decision of the Tribunal in Paresh K. Shah (supra) has been challenged in appeal. This in view of absence of any instructions from the officers of the Revenue. In the above view, one has to proceed on the basis that thedecision of the Mumbai Bench of the Tribunal in Paresh K. Shah (supra) has been accepted by the Revenue. In any case, no distinguishing features in facts or law has been pointed to us from those in the case of Paresh K. Shah (supra) which would justify the disallowance on the gross interest paid and not on net interest.”
Read the full text of the Judgment below.
