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2014 (4) TMI 156 - AT - Income TaxDisallowance u/s 14A of the Act – Invocation of Rule 8D of the Rules – Whether or not the CIT(A) was justified in confirming the disallowance u/s 14A for the assessment year 2002–03, 2004–05, 2005–06 and 2007–08 - Held that:- The decision in GODREJ AND BOYCE MFG. CO. LTD. Versus DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (8) TMI 77 - BOMBAY HIGH COURT] followed – No deduction shall be allowed in respect of expenditure incurred by the assessee in relation to such income which does not form part of the total income under the Act, by virtue of the provisions of Section 14A(1) - The provisions of Rule 8D of the Income Tax Rules as inserted by the Income Tax (Fifth Amendment) Rules 2008. The AO is duty bound to determine the expenditure which has been incurred in relation to income which does not form part of the total income under the Act – thus, the matter is remitted back to the AO for fresh consideration as to the analysis of administrative expenses shown by the assessee and to examine the nature of interest expenditure and if the interest expenditure does not pertain to any investment which has yielded or is capable of yielding any exempt income, then such interest expenditure cannot be allocated or can be considered for making any disallowance and if general administrative expenditure cannot be properly allocated or attributable for the purpose of exempt income, then while arriving at the 0.5% average investment, the Assessing Officer shall remove those investments which are not capable of earning exempt income – Decided in favour of Assessee.
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