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2014 (9) TMI 516 - AT - Income TaxApplication of section 14A r.w rule 8D – Dividend on shares or mutual funds – Held that:- It could not be said that the satisfaction of the AO is a bald satisfaction without specifying any particular item of the expenditure which was incurred for earning of dividend income – relying upon Maxopp Investment Ltd. Vs. CIT - [2011 (11) TMI 267 - Delhi High Court] - the investment in the shares is only ₹ 6,46,000/- plus ₹ 2,42,648/- but, it is in large number of companies - The investment in the mutual funds is ₹ 14,58,81,026 - the assessee invested in more than 50 different mutual funds - It cannot be believed that no effort was involved in the entire process - when there is investment in large number of mutual funds and moreover during the year various mutual funds were liquidated and investment made in various new mutual funds, certainly, the assessee must be keeping details in a systematic manner and some staff must be doing that job. When there is a mixed account and the assessee is carrying on the business, it is practically impossible to specify which particular portion of the expenditure was incurred for the purpose of earning dividend income - the assertion of the assessee that no expenditure was incurred for earning of dividend income is a bald assertion, contrary to the obvious facts on record and the satisfaction of the AO that some expenditure was incurred for earning of exempt income is based upon the facts of the case – thus, a proper satisfaction as required by Section 14A was duly recorded by the AO and, he was fully justified in working out the disallowance as per Rule 8D of the Income-tax Rules, 1962 - as far as the discrepancy in the working of Rule 8D is concerned, the matter is remitted back to the AO for verification of working of Rule 8D – Decided partly in favour of assessee.
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