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2015 (8) TMI 41 - AT - Income TaxDisallowance u/s. 14A - Held that:- As rightly pointed out before the AO, as well as before us interest arrived at by the AO in the consequential order is pertaining to the banking operations which cannot be disallowed u/s. 14A. Infact in the assessment order AO accepted assessee contention. As seen from the amount of investment and sources of funds, assessee has adequate funds for making the investment. Since, no interest is attributable to the investments, no disallowance is called for under Rule 8D(ii). Out of the treasury expenditure of ₹ 65,50,068/- attributable to this activity, as per the earlier appellate orders only two months of treasury expenditure can be considered as directly attributable to exempt income. Accordingly, the disallowance u/s. 8D(i) can be determined at ₹ 10,91,678/- as originally disallowed by assessee. That leaves with 8D(iii). One half percent of average value of investment as worked out by assessee comes to ₹ 1,03,35,091/-. This amount only can be disallowed under Rule 8D(iii). Therefore, since assessee has already disallowed an amount of ₹ 10,91,678/-, further amount to be disallowed u/s. 14A r.w. Rule 8D is to an extent of ₹ 1,03,35,091/-. AO is directed to modify the order accordingly. - Decided partly in favour of assessee.
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