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2015 (2) TMI 672 - PUNJAB AND HARYANA HIGH COURTDisallowance u/s 14A read with Rule 8D - interest on loans, on investments earning tax free income in the form of dividend - ITAT confirming the order of CIT(A) deleting the disallowance - Held that:- Section 14A of the Act requires the Assessing Officer to record satisfaction that interest bearing funds have been used to earn tax free income. The satisfaction to be recorded must be based upon credible and relevant evidence. The onus, therefore, to prove that interest bearing funds were used, lies squarely on the shoulders of the revenue. Assessing Officer, however, cannot, by recording general observations, particularly where the assessee has denied using interest bearing funds, proceed to infer that interest bearing income must has been used to earn exempted income. Section 14A of the Act, being in the nature of an exception, has to be construed strictly and only where the Assessing Officer records satisfaction, on the basis of clear and cogent material, shall an order be passed under Section 14A of the Act, disallowing such a claim. As there is no tangible material on record that could have enabled the Assessing Officer to record satisfaction in terms of Section 14A of the Act, findings recorded by the CIT(A) and the ITAT that the Assessing Officer has failed to discharge this onus are neither perverse nor arbitrary and, therefore, do not call for interference. - Decided in favour of assessee.
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