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2014 (9) TMI 351 - AT - Income TaxDisallowance u/s 14A r.w. Rule 8D – Held that:- Assessee was found to have earned exempt income by way of dividend on investments made in the mutual funds - The existence of such exempt income prompted the AO to invoke section 14A of the Act while computing the total income of the assessee - invoking of rule 8D of the Rules in order to compute the disallowance u/s 14A of the Act is neither automatic and nor is dependent merely on the existence of an exempt income in the hands of the assessee – relying upon GODREJ AND BOYCE MFG. CO. LTD. Versus DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (8) TMI 77 - BOMBAY HIGH COURT] - the invoking of rule 8D of the Rules in order to compute the disallowance u/s 14A of the Act is to be understood as being conditional on recording of an objective satisfaction by the AO with regard to the incorrectness of the claim of the assessee in respect of expenditure in relation to the exempt income, having regard to the accounts of the assessee - the parity of reasoning in relation to invoking of rule 8D of the Rules read with section 14A of the Act applies. In the absence of adherence to the requirements of section 14A(2) of the Act, the AO could not have proceeded to invoke rule 8D of the Rules and subject the interest expenditure for disallowance as per clause (ii) of rule 8D of the Rules - the CIT(A) records another finding which is to the effect that the dividend receipt has been directly credited into the bank account of the assessee, thus "leaving no scope for incurring any other expenses for earning exempt income" by the assessee - the indirect expenditure sought to be disallowed by invoking clause (iii) to sub-rule (2) of rule 8D of the Rules has also been faulted by the CIT(A) - the AO was not justified in invoking rule 8D of the Rules in order to compute the disallowance u/s 14A(1) of the Act –Decided against revenue. Income derived from the letting out of premises – Business income or not house property – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that CIT(A) in holding that the income earned by way of license of letting out of premises of 'Cyber City' is liable to be assessed as 'business income' and not under the head 'house property', as held by the AO – Decided against revenue.
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