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2018 (5) TMI 58 - ITAT DELHIDisallowance u/s 14A r.w.s. 8D - Held that:- In terms of section 14A(2) before invoking Rule 8D of the Rules, the Assessing Officer is required to dissatisfied with a claim of the assessee and then only he can resort to compute the disallowance according to the method prescribed. CIT(A) has examined the claim of use of own funds of the assessee in investments and concluded that no disallowance could be made under rule 8D(2)(i) of the Rules in absence of utilisation of borrowed funds for investment. In our opinion, the CIT(A) had duly verified that no borrowed funds have been utilised for investment in shares yielding exempt income and Ld. DR could not point out any error in the verification and finding of fact recorded by the Ld. CIT(A). In view of the above, no disallowance could be made for expenditure directly relatable to the investment in terms of Rule 8D(2)(i) of the Rules. The exempt income is only ₹ 3,30,091/- and, therefore, the disallowance under section 14A of the Act, is restricted to the extent of ₹ 3,30,091/-. Accordingly, the ground of the appeal of the Revenue is partly allowed. Protective addition - Capital addition - Held that:- CIT(A) has recorded that addition made on this issue in assessment year 2006-07 has been upheld by the 1st appellate authority and the assessee has deposited the relevant taxes during financial year 2008-09 and 2009-10. CIT(A) has concluded that the capital gain has been assessed in assessment year 2006-07 in accordance with the provisions of section 45 of the Act. In our opinion, the order of the Ld. CIT(A) on the issue-in-dispute is well reasoned and we do not find any infirmity in the same. Accordingly, the ground No. 2 of the appeal of the Revenue is dismissed.
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