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2014 (9) TMI 1255 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - borrowed funds were also utilised partly by the assessee for making tax free investments and the disallowance to be made u/s 14A was required to be computed as per clause (ii) and (iii) of Rule 8D(2) - CIT(A) held that the said disallowance on account of interest made by the Assessing Officer based on the quantum of investment was correct and the same was accordingly confirmed by the learned CIT(A) - HELD THAT:- At the time of hearing before us, the learned Departmental Representative has not been able to rebut or controvert the findings recorded by the learned CIT(A), which formed the basis of relief allowed by him to the assessee. We, therefore, find no justifiable reason to interfere with the impugned orders of the learned CIT(A) in directing the Assessing Officer not to consider the interest paid by the assessee on the loans borrowed after the financial year 2005-06 and also the interest directly relating to any other taxable income, while computing the disallowance under Rule 8D(2). The same are accordingly upheld on this issue and the appeals of the Revenue are dismissed. Mandation of recording satisfaction - Correctness of the claim of the assessee of having not incurred any expenditure for earning the exempt income - No details were filed by it showing the basis for working out the disallowance at ₹ 1-lakh offered under S.14A. A perusal of the assessment order also shows that the issue of other expenses indirectly attributable to the earning of exempt income was not separately discussed by the Assessing Officer and there was no finding given by him on this aspect. Although the learned CIT(A) has observed in his impugned order that dissatisfaction was recorded by the Assessing Officer as regards the correctness of the claim of the assessee of having not incurred any expenditure for earning the exempt income, we find that there is no such finding specifically recorded by the Assessing Officer in the assessment order. As already noted by us, the assessee has also taken contradictory stand on this issue and in the absence of any details filed by it, giving the basis of disallowance of ₹ 1 lakh offered in the computation of total income, there was no occasion for the Assessing Officer to record his satisfaction or dissatisfaction about the correctness of the claim of the assessee on this aspect. Having regard to all these facts of the case, clearly borne out from the record, we are of the view that it would be fair and proper to restore this matter to the file of the Assessing Officer for deciding the same afresh in accordance with law, after giving the assessee a proper and sufficient opportunity of being heard. Accordingly, the impugned order of the learned CIT(A) on this issue is set aside and the matter is restored to the file of the Assessing Officer for deciding the issue in relation to the disallowance to be made under S.14A on account of other expenses as per Rule 8D(2)(iii) afresh. The appeals of the assessee are accordingly treated as allowed for statistical purposes.
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