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2018 (10) TMI 1113 - AT - Income TaxDisallowance u/s 14A - no expenditure incurred towards exempted income - Held that:- It is settled law that the dissatisfaction as to the claim of the assessee of the amount incurred towards exempted income or no expenditure incurred towards exempted income, is prerequisite for invoking provisions of section 14A(2) read with rule 8D of the Rules. We find that the Ld. CIT(A) in para 4.3.1 of the impugned order has recorded that AO has not given the finding that he was not satisfied with assessee’s claim of no expenditure incurred on the investment activity. The recording of dissatisfaction whether expressly or impliedly, is a requirement of law for making disallowance by the Assessing Officer and the Ld. CIT(A) cannot substitute the said dissatisfaction, which the Assessing Officer is required to record. Though on the merit, the Ld. CIT(A) has correctly recomputed the disallowance by way of segregating the interest expenditure directly related to investment for earning exempt income and interest which could not be directly attributable to any particular income, but once he himself has held that mechanical applying of Rule 8D by the AO is not tenable in view of the judicial pronouncement relied upon by the Ld. AR, he cannot proceed to recompute the disallowance. As per the records available before us, the Revenue has not filed any appeal challenging the finding of the Ld. CIT(A) that Assessing Officer has not given any finding as to dissatisfaction on the claim of the assessee of no expenditure incurred towards investment activity. Thus the action of Ld. CIT(A) in proceeding on merit to re-compute the disallowance under section 14A read with Rule 8D, is not justified and we accordingly reject it. - Decided in favour of assessee. Disallowance u/s 36(1)(iii) - assessee raised loan funds at high rate of interest but transferred to a sister concern or group concern at lower rate of interest or no interest without any business purpose - Held that:- In the instant case, the assessee has failed to substantiate that the funds extended to sister concern were for the purpose of the business. In our opinion, the finding of the Ld. CIT(A) on the issue in dispute is well reasoned and we do not find any infirmity in the same, accordingly we uphold the disallowance and enhancement by the Ld. CIT(A) - decided against assessee.
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