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2012 (12) TMI 728 - AT - Income TaxDisallowance of interest u/s 36 - There was a debit balance throughout the year and there was opening debit balance and even on closing of the year there was a debit balance - Assessee has in fact made purchases of Rs. 5.40 crores and even sales have been made at Rs. 3.10 crores – Held that:- As concluding from the fact of the case assessee had made regular business dealings and the amounts going into debit are on account of sales when the assessee was doing business with the sister concern then it is natural that some time account may be in debit. Addition deleted. In favour of assessee Disallowance of expense u/s 14A – Expense incurred in relation to earn exempt income – Assessee has incurred interest expenses whereas income from investments was found to be exempt - Held that:- As the disallowance u/s 14A is based on Rule 8D which has been noted above was applicable during the year under consideration and which is in consonance with the decision of Godrej and Boyce Manufacturing Co. Ltd. (2010 (8) TMI 77 - BOMBAY HIGH COURT). Therefore, restore that of the AO by confirming the disallowance u/s 14A rule 8D of IT Rules is applicable in the year before us and disallowance has been worked out as per Rule 8D. Issue remand back to AO in favour of assessee
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