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2015 (10) TMI 1418 - AT - Income TaxDisallowance u/s 14A read with Rule 8D - Held that:- Since the assessee has made investment in a Wholly Owned Subsidiary Overseas - Epsilon Limited, Mauritius, the dividend income of which was liable to be taxed in India, the A.O. was not justified in taking such investment for computing disallowance to be made under Rule 8D. The same should not be taken into account while computing the disallowance under Rule 8D(2)(iii) of the I.T. Rules. Accordingly we direct the A.O. to exclude such strategic investment while computing disallowances under Rule 8D. From the record we also found that the assessee had made fresh investments in Birla Sun Life Cash Plus, in LIC Mutual Fund Income Plus Fund and LIC MF Liquid Fund. The initial investment is made from cash generated from operating activities which was ₹ 24,74,14,673/- as per cash flow statement forming part of annual report. After making above initial investments the assessee have made various redemptions in respective plans during the years from such redemption proceed only new purchases of investments have been made. It appears that no borrowings had been used for investing in Mutual funds from which income not forming part of total income have been earned. Therefore the interest cost which had been used by ACIT - (OSD) should be excluded while applying Rule 8D. In view of the above discussion, we restore the matter back to the file of A.O. for re-working the amount of disallowance to be made u/s 14A of the Act. - Decided in favour of assessee for statistical purpose.
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