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2022 (1) TMI 927 - ITAT DELHIDisallowance u/s 14A read with rule 8D - dividend income - HELD THAT:- We do not see an infirmity in the finding of Ld.CIT(A) that the provision of section 14A of the Act, cannot apply to the dividend income from OMIFCO which is part of the total income. The Grounds raised by the Revenue are devoid of any merit hence, rejected. Disallowance being amortization of lease payment - as argued these are allowable business expenditure for determining the taxable income and should have been allowed - HELD THAT:- The issue has been decided against the assessee by the Hon’ble Delhi High Court in the assessee’s own case [2012 (7) TMI 526 - DELHI HIGH COURT] Therefore, respectfully following the judgement of the Hon’ble Delhi High Court, we do not see any infirmity in the finding of ld.CIT(A), the same is hereby affirmed.- Decided against assessee. Addition u/s 14A - Mandation of recording satisfaction - contention of the assessee is that the assessee had sufficient interest free funds which were used for making additional equity investment in the shares in Gujarat State Energy Generation Ltd. and the AO has not recorded his satisfaction regarding the expenditure sought to be disallowed is related to earning of exempt income - HELD THAT:- authorities below failed to appreciate that Rule 8D r.w.s.14A of the Act can be invoked only when the AO from the books of accounts of assessee placed before him is able to demonstrate that the expenditure sought to be disallowed, has been incurred for earning tax free income. It is stated that Rule 8D has been mechanically invoked by the AO without establishing such nexus. He further submitted that the assessee had demonstrated before the authorities below that the assessee was having sufficient interest free fund available to make investment wherefrom it had earned exempt income. We find merit on this contention of the Ld. Counsel for the assessee. The law is wellsettled that the section 14A would come into play, where the AO gives a clear finding regarding expenditure incurred for earning of income. Where the assessee is able to demonstrate that the investment was made out of own interest free fund in such cases, no disallowance would be called for regarding interest expenditure. Therefore, in the absence of clear finding by AO and disallowance on the basis of guess work cannot be sustained. Hence, we direct the AO to delete the disallowance - Decided in favour of assessee.
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