• Satisfaction of AO with regard to correctness of claim

The HC in the case of Devarsons Industries (P.) Ltd. (supra) and Indiabulls Financial Services Ltd. (supra) spell out that the recording of satisfaction of the AO is necessary, there is neither any specific or particular manner in which such satisfaction or dissatisfaction should be recorded

• No exempt income means no disallowance
  • When Assessee has not earned any exempt income, no disallowance under Section 14A is required to be made.
  • When Assessee has earned exempt income, disallowance under Section 14A is required to be restricted to the extent of exempt income.

• Depreciation is an allowance and not an expenditure so it cannot be brought within the ambit of Section 14A.

• Own fund v. borrowed fund – where assessee’s own funds and other non-interest bearing funds were more than investment no disallowance of interest payments under Section 14A.

• Dominant Purpose of investment whether to acquire control, strategic investment or to trade in stock is not relevant

• Value of investment’ – average value of tax exempt investment is to be adopted instead of factoring in total investment itself.