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2015 (11) TMI 1441 - AT - Income TaxDisallowance of proportionate interest - AO disallowed interest paid to HDFC Bank on car loan on the basis that the assessee had made huge interest free advances - Held that:- It is now a well established proposition of law that when assessee was having an adequate non-interest bearing fund, disallowance of interest paid on borrowed fund cannot be made since in such a case, there was no nexus between the advance given and borrowals made by the assessee. It is also not the case of the Assessing Officer that the loan was not taken for the business purposes. We thus while setting aside orders of the authorities below on the issue direct the Assessing Officer to delete the addition - Decided in favour of assessee. Disallowance under sec. 14A read with Rule 8D - Held that:- Assessing Officer before invoking the provisions of Rule 8D has to record his satisfaction in terms of sub-section (2) of section 14A of the Act. In the present case, when the assessee himself had disallowed the expenditure incurred on the management of its portfolio for earning the dividend income, the Assessing Officer had to record his satisfaction first that the expenditure shown by the assessee for earning the dividend income was not satisfactory before invoking the provisions of section 14A of the Income-tax Act, 1961 read with Rule 8D of the I.T. Rules to make disallowance there under. In absence of the compliance of such mandatory requirement, the Assessing Officer was not justified in making the disallowanc under sec. 14A of the Act read with Rule 8D of the I.T. Rules. - Decided in favour of assessee.
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