Section 14A of the Income Tax Act, 1961- Business Disallowance - Disallowance under section 14A r.w. Rule 8D(2)(iii) cannot exceed the exempt income earned. It is a well settled legal proposition that where both, interest bearing and own interest free funds are available, it shall be presumed that investments are made from own funds

Facts: Matter which was raised in the appeal was that the assessee has made suo-motu disallowance of Rs. 10,000/-. The CIT (A) has enhanced disallowance to dividend income earned. The ld. Authorized Representative of the assessee prayed that the disallowance under rule 8D(2)(iii) may be restricted to suo motu disallowance made by the assessee.

Held, that the disallowance made by the Assessing Officer was unwarranted. The Demat charges were related to assessee’s Share Broker business and were unrelated to earning of exempt income. As regards interest expenditure, the assessee has shown from the Balance Sheet as on 31/3/2012, that own funds of the assessee were much more than the investments made. It is a well settled legal proposition that where both, interest bearing and own interest free funds are available, it shall be presumed that investments are made from own funds. Hence, the disallowance made under rule 8D (2)(i) & (ii) were uncalled for. - JHP SECURITIES PVT. LTD. V/s ITO - [2020] 26 ITCD Online 064 (ITAT-MUMBAI)