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2015 (2) TMI 355 - AT - Income TaxDisallowance u/s 14A r.w.r 8D - whether there is no finding by the AO that the assessee has incurred interest expenditure relatable to earning of exempt income? - Held that:- There is no charge to the profit and loss account on account of interest. The investments in equity shares were made in the earlier year and not during the current year. There is no fresh investment during the year. The AO by invoking the provisions of Rule 8D has disallowed interest expenditure of ₹ 59,485/- under Rule 8D(2)(ii). As already stated the assessee has not claimed any expenditure under the head interest expenditure. When the AO could not demonstrate that the assessee has incurred interest expenditure for earning income which does not form part of total income, the question of applying Rule 8D(2)(ii) does not arise. Thus the disallowance has to be necessarily deleted. . As regards disallowance computed under Rule 8D (2)(iii) on account of administrative charges, the Ld. CIT(A) has upheld the computation made by the AO. The argument of the assessee that the AO has not recorded his satisfaction while invoking rule 8D is not correct, thus the disallowance to the extent of ₹ 72,000/- is upheld. - Decided partly in favour of assessee. Assessment of interest income - "income from other sources" or "Business Income" - Held that:- The interest is not earned out of surplus money. The assessee had an obligation to repay its debentures holders etc. and was acting under the directions of the Hon’ble Delhi High Court and Hon’ble Mumbai High Court in the process of fulfilling its financial obligations certain interest is earned. On this factual matrix in our view the interest is assessable only under the head "income from business" but not under the head "income from other sources". The assessee is a NBFC and money in its stock in trade. Interest income received from fixed deposits, is business income. - Decided in favour of assessee.
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