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2016 (5) TMI 1533 - AT - Income TaxDisallowance of expenditure u/s 14A - assessee accounted dividend income during the year under consideration which was exempted u/s 10(35) - AO by applying third limb of Rule 8D of the Income-tax Rules, disallowed 0.5% of the average investment which yielded the exempted income - as per AR no expenditure was incurred for earning the exempted income - HELD THAT:- It is nobody’s case that the assessee has borrowed any loan for the purpose of making investment, therefore, the first limb of Rule 8D may not be applicable. No material is available on record to suggest that the assessee has incurred any interest expenditure which are not directly attributable to any particular income or receipt. Second limb of Rule 8D is also not applicable. Now coming to third limb of Rule 8D, an amount equal to 0.5% of the average value of the investment, income from which does not or shall not form part of the total income as appearing in the balance sheet of the assessee as on the first day and last day of the previous year, has to be considered for disallowance. In this case, AO has considered the investments which are appearing in the balance sheet as on the first day and last day of the previous year and taken the income which was not formed part of the total income. Therefore, this Tribunal is of the considered opinion that the Assessing Officer has rightly applied third limb of Rule 8D for making the disallowance. - Decided against assessee.
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