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2016 (7) TMI 1241 - ITAT MUMBAIDisallowance u/s 14A - assessee had made a suo moto disallowance on prorata basis - Held that:- We find that the AO had made a disallowance of ₹ 7.76 lakhs, that he disallowed an amount of ₹ 4.4lakhs on account of interest payment, that the assessee had made a suo moto disallowance of ₹ 3. 36 lakhs on prorata basis, that while making the disallowance the AO had not mentioned as to why the disallowance made by the assessee, amounting to ₹ 3,36,454/- was not acceptable. Without expressing any dissatisfaction over the method followed by the assessee for the disallowance, he should not have applied the provisions of Rule 8D r.w.s. 14A(2). We further find that assessee had own funds of ₹ 14.24 crores and investment made by it stood at ₹ 11. 99 crores. Therefore, incurring of interest expenditure for making investment had to be proved by the AO. We find that he has not dealt the issue at all and mechanically applied the provisions of section 14A r.w.r 8D. For disallowing any expenditure first the AO has to prove incurring of expenditure and its relation with earning of exempt income. If the assessee has not incurred any expenditure no disallowance can be made. Assessee has made disallowance of ₹ 3.36 lakhs under the head administrative/managerial expenditure which is more than the disallowance made by AO i.e. ₹ 2.99 lakhs. - Decided in favour of assessee.
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