Dismissing the appeal of the revenue the Tribunal held that ;for the purpose of applying rule 8D(2)(ii) prior to its amendment with effect from 2-6-2016, what would be considered as amount of expenditure by way of interest would be the interest paid by the assessee on the borrowings minus the interest income earned during the financial year. The interest income earned during the year being more than the interest expenditure incurred, the disallowance made by the AO on account of interest u/s. 14A by applying rule 8D(2)(ii) was deleted by the CIT(A) on the ground that there was no net interest expenditure incurred by the assessee. Before the ITAT revenue challenged the same stating that there nothing brought on record to show an inextricable link between the interest earned and interest paid. Tribunal affirmed the order of CIT( A ) .(AY.2009 -10)
Dy. CIT v. UMIL Share & Stock Broking Services Ltd. (2018) 171 ITD 713 /170 DTR 441/196 TTJ 91(Kol)(Trib.)
S. 14A : Disallowance of expenditure – Exempt income –Net of interest-Benefits of netting of interest under rule 8D(2)(ii) be allowed without even emphasising on need of having any inextricable link between interest earned and interest paid prior to 2-6-2016. [ R.8D(2)(ii) ]