COMMISSIONER OF INCOME TAX Vs. ALEMBIC LIMITED

JUDGEMENT

(1.) These tax appeals arise out of a common judgment. We may record facts from Tax Appeal No.553/2017.

(2.) Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal dated 9.12.2016 raising following questions for our consideration : "

(3.) First and second questions are interlinked and pertain to disallowance under section 14A of the Act. The first question is connected with Rule 8D whereas the second is with respect to disallowance for the purpose of computation of book profit under section 115JB of the Act. The assessee had made investments earning tax free income. The assessee also had borrowed funds paying interest. The Assessing Officer was of the view that sum of Rs. 75,02,592/which represented the interest expenditure of the assessee, should be disallowed with the aid of section 14A of the Act. CIT (Appeals) as well as Tribunal however came to factual findings that the assessee had substantial interest free funds far in excess of the investments in earning tax free income. The Tribunal while confirming the view of CIT (Appeals) made the following observations :