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25-May-2017 10:17

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That since the assessee had earned exempt income from such investments funded by borrowed funds on which it incurred interest expenditure, by virtue of section 14A, such expenses were not allowable.

The AO, thereafter discussed about the promulgation of sec.14A by the Finance Act, 2001 with retrospective effect and held that the ratio of Rajasthan State Warehousing Corporation (2000) 242 ITR 450(SC) was no more applicable.

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The AO therefore observed that the entire dividend income was by the activity of head office (HO).

The assessee explained that it held shares in the companies promoted by it.

That the entire investments were made for business purposes for having control over subsidiary and associated companies.

He, therefore, has contended that the interest expenditure incurred by the assessee is otherwise allowable as business expenditure u/s 36(1) (iii) of the Act.

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