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2018 (6) TMI 1601 - ITAT HYDERABADDisallowance u/s. 14A - HELD THAT:- AO also has not established that assessee has diverted the borrowed funds for the purpose of investments and unnecessarily invoked Rule 8D(2), which only applies to certain interest payments where the use of funds could not be established for the purpose of business. If there is any diversion of funds borrowed for the purpose of business, the provisions of Section 36(1)(iii) will directly apply wherein the disallowance is 100% and not proportionate, as provided in Rule 8D(2). Since no nexus is established, the disallowance per se under Rule 8D(2) does not apply. Moreover, similar issue was considered in assessee’s own case by the Coordinate Bench in the AY. 2011-12, wherein the Tribunal has confirmed the order of CIT(A), in restricting the disallowance to the amount claimed as exempt, following the principles laid down by the various Hon'ble High Courts. We modify the order of CIT(A) and direct the AO to restrict the disallowance to the amount of dividend earned and claimed as exemption. - Appeal of assessee is partly allowed.
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