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2014 (6) TMI 705 - AT - Income TaxDisallowance u/s 14A of the Act – Held that:- Following Godrej Boyce Mfg. Co. Ltd. vs. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COUR] - Rule 8D of the Income Tax Rules is applicable only prospectively i.e., from AY 2008-09- The AY pertaining to the case in hand is 2006-07 to which the Rule is not applicable - the authorities below are not justified in making the disallowance by invoking Rule 8D of the Income Tax Rules. Disallowance out of the interest expenses – Held that:- Borrowings have actually been reduced though investments have significantly increased - the own funds of the assessee is sufficient to cover the investments - the authorities are not justified in disallowing out of expenditure involved on account of interest. Percentage of the exempt income can constitute a reasonable estimate for making disallowance in the years earlier to the AY 2008-09 - disallowance ranges between 2 to 5 percentage of the dividend income – thus, it would be just and reasonable that 2% of the exempt income would constitute a reasonable disallowance on account of indirect expenses for earning the exempt income u/s 14A of the Act – Decided in favour of Assessee.
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