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2016 (2) TMI 119 - AT - Income TaxDisallowance u/s 14A - Held that:- We find from the facts of the instant case that the Learned AO has though had examined the accounts of the assessee with regard to the availability of own funds in the context of making separate disallowance of interest on borrowed capital u/s 36(1)(iii) of the Act, did not look into the accounts of the assessee in the context of Rule 8D(1) of the IT Rules and record his satisfaction as mandated thereon that the claim of the assessee that no expenditure was incurred for earning exempt income is incorrect. The assessee had claimed that no expenses were incurred by it for the purpose of earning the exempt income in the form of dividend as admittedly the said dividend income was earned out of auto swap funds which was done directly by the bank without any interference from the side of the assessee. Hence there was no need for the assessee to incur any expenditure thereon for earning the dividend income. We find that the Learned AO rejected the claim of assessee with regard to claim of assessee that no expenditure was incurred in relation to exempt income without indicating any cogent reasons for the same. We find that the Learned AO had straight away embarked upon computing disallowance under Rule 8D(2)(iii) of the Rules. Hence we hold that the action of the Learned AO in directly embarking on Rule 8D(2) of the Rules is not appreciated and hence no disallowance u/s 14A of the Act could be made in the facts of the instant case. - Decided in favour of assessee
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