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2016 (5) TMI 1278 - AT - Income TaxDisallowance u/s 14A read with rule 8D - Held that:- We find that the assessee has got sufficient own funds in the form of share capital and Reserves and Surplus, which is much more than the investments made by the assessee and hence, it can be safely concluded that the investments were made only out of the own funds of the assessee The hon'ble Bombay High Court in CIT v. Reliance Utilities and Power Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT ] has held that where the interest-free funds far exceed the value of investments, it should be considered that investments have been made out of interest-free funds and no disallowance under section 14A towards any interest expenditure can be made. Apropos, the non-recording of satisfaction by the Ld. AO in terms of Rule 8D(1) of the Rules, we hold that the Ld. AO is supposed to record his satisfaction as to how the disallowance made by the assessee in the return of income is incorrect with specific reference to books of account of the assessee. In the instant case, the Ld. AO had not recorded the satisfaction in the required manner as per Rule 8D(1) of the Rules. Hence, we hold that Ld. AO is not entitled to mechanically apply rule 8D(2) of the Rules without recording satisfaction in terms of Rule 8D(1) of the Rules - Decided in favour of assessee
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