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2014 (8) TMI 1077 - AT - Income TaxDisallowance made under section 14A - Held that:- We find that the assessee had received dividend of ₹ 4,17 during the year under consideration,that on its own it had calculated the disallowance of ₹ 11,663/- u/s.14A r.w.r.8D of the Rules,that the FAA had deleted the addition of ₹ 181.95 lakhs and had confirmed the balance addition of ₹ 31.74 lacs, that the AO had filed appeal against the deleted of the disallowance whereas the assessee has challenged the order of the FAA for confirming the disallowance of ₹ 31.74 lakhs.We find that the FAA has deleted the addition because he was of the opinion that Rule 8D (2) (ii) was not properly applied by the AO. He found that interest expenses were related to the business of the assessee and not to the investment that yielded exempt income.In our opinion,no interest disallowance can be made if the assessee utilises borrowed funds for purposes other than investment. In the matter under appeal the FAA has given a finding of fact that the assessee had borrowed loans from various banks for specific purpose like purchase of plant, machinery other assets working capital for business, purchase of raw material, packing material, stores & spares,etc,that the other interest and finance charges had also been incurred towards business of manufacturing of ready made garments, that the loans were for the specific purpose of the business,that the interest expenditure was directly related towards business income which was taxable.DR could not controvert the finding given by him. Therefore, confirming his order we decide the effective ground of appeal against the AO and hold that interest expenditure incurred by the assessee was not hit by the provisions of rule 8D (2)(ii)of the Rules. - Decided in favour of assessee.
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