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2016 (1) TMI 1355 - ITAT MUMBAIDisallowance u/s 14A read with Rule 8D - investment yielding tax free return were made out of borrowed funds - Held that:- We delete the addition under rule 8D(2)(ii) - merely because there was a common pool of funds and a presumption cannot be drawn that investment yielding tax free return were made out of borrowed funds. In the case of Pr. CIT Vs. India Gelatine and Chemicals Ltd.(2015 (11) TMI 392 - GUJARAT HIGH COURT) it was held that tribunal categorically found on the basis of material on record that assessee has tax free return out of which the investments was made and the deletion of disallowance u/s 14A read with Rule 8D was justified. The case of the assessee is squarely covered by the above decisions and we, therefore, delete the disallowance of ₹ 23,58,695/- on account of interest made under rule 8D(ii). As regards the disallowance u/s 14A read with Rule 8D(iii) of ₹ 21,65,696/-, it is pertinent to state that Rule 8D was made applicable w.e.f. AY 2008-09. We are of the view that Rule 8D is not applicable to the AY 2007-08 in view of the judgment of the Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. Vs. CIT (2010 (8) TMI 77 - BOMBAY HIGH COURT). Moreover, the disallowance of ₹ 21,65,696/- was excessive. We, therefore, set aside the order of the CIT(A) and restore back the matter to the file of the AO with the direction to work out disallowance u/s 14A on a reasonable basis - Decided in favour of assessee for statistical purposes
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