The following important judgement is available for download at itatonline.org.
CIT vs. HDFC Bank Ltd (Bombay High Court)
No s. 14A disallowance of interest paid on borrowings if assessee's own funds and non-interest bearing funds exceeds investment in tax-free securities
In principle, if there are funds available, both interest-free and over draft and/or loans taken, then a presumption would arise that investments would be out of the interest-free funds generated or available with the company if the interest-free funds were sufficient to meet the investment. On facts, the assessee's own funds and other non-interest bearing funds were more than the investment in the tax free securities. Consequently, the ITAT rightly held that there was no basis for deeming that the assessee had used borrowed funds for investment in tax free securities (Reliance Utilities and Power Ltd 313 ITR 340 (Bom), East India Pharmaceutical Works 224 ITR 627 (SC) & Woolcombers 134 ITR 219 (Cal) followed)
Regards,
Editor,
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