TMI Blog2014 (4) TMI 666X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee has kept the funds idle is not based on any material but only on surmises and conjectures - the AO has computed notional interest on the outstanding bank balance as at the year end, which is not permissible under the Act – thus, the order of the CIT(A) set aside and the AO is directed to delete the addition – Decided in favour of Assessee. Disallowance made u/s 14A of the Act – Held that:- The AO has applied Rule 8D, which is not applicable to the year - the assessee has earned exempted income - some amount of disallowance is called for in terms of sec. 14A - Assesseee as well as revenue agreed that a sum of Rs.15,000/- may be disallowed – thus, the order fo the CIT(A) and the AO is directed to restrict the addition – ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 60,12,813/-, which works out to Rs.7,21,537/-, and added the same to the total income of the assessee. The AO noticed that the assessee has earned exempted income of Rs. 18,051/- from the investments made with UTI tax free bonds. The total value of the investments made in UTI bonds was Rs. 5,47,000/-. Hence, the AO, by applying the provisions of Rule 8D of I T Rules r.w.s 14A of the Act, computed the disallowance at Rs. 16,378/- and added the same to the total income of the assessee. 4. In the appellate proceedings, the ld CIT(A) noticed that the assessee had earned interest from bank deposits to the tune of Rs. 5,07,014/-. Hence, the ld CIT(A) gave set off of the same against the interest added by the AO and accordingly restricted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest from out of current account. The ld AR further submitted that it is the prerogative of the business man to regulate its business affairs and hence, the AO was not justified in entertaining such kid of presumption against the assessee. With regard to the disallowance made u/s 14A of the Act, the Ld A.R submitted that the provisions of Rule 8D was not applicable to the year under consideration and hence the tax authorities are not correct in applying the same to the instant year. 6. On the contrary, the Ld D.R placed strong reliance on the order of Ld CIT(A). 7. We have heard the rival contention and carefully perused the records. The first issue relates to the addition of estimated interest amount on the outstanding bank bala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of Ld CIT(A) on this issue and direct the AO to delete the entire addition of Rs.7,12,537/-, discussed above. 8. The next addition relates to the disallowance of Rs.16,378/- made under sec. 14A of the Act. We notice that the AO has applied Rule 8D, which is not applicable to the year under consideration. Since the assessee has earned exempted income, the Ld A.R was pointed out that some amount of disallowance is called for in terms of sec. 14A. The Ld A.R fairly agreed that a sum of Rs.15,000/- may be disallowed and the said proposal was also accepted by Ld D.R. Accordingly, we modify the order of Ld CIT(A) on this issue and direct the AO to restrict the addition to Rs.15,000/- on this ground. 9. In the result, the appeal of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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