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2016 (4) TMI 309 - AT - Income TaxDisallowance u/s 14 A - Held that:- We find that the assessee had earned dividend income of ₹ 1. 08 lacs, that it had made a disallowance of ₹ 17, 503/- on its own as per the provisions of Sec. 14A of the Act, that the AO had made a dsisallowance of ₹ 2. 02 lakhs, that the AO had not mentioned as to how much expenditure was incurred by the assessee for earning exempt income, that submission made by the assessee was not considered properly by the AO. We are of the opinion that disallowance u/s. 14A can be made, if an assessee claims an expenditure for earning exempt income. In other words, if no expenditure is claimed by the assessee in its P&L account for earning tax free income no disallowance can be made. Secondly, the disallowance cannot exceed the exempt income. In the case under consideration the assessee had incrred an expenditure of ₹ 17, 503/-(DMAT charges) and that was the only item which could have been disallowed. The AO himself had mentioned that assessee in its computation of income had made the said disallowance. In these circumstances, we are of the opinion that order of the FAA was not justified. Reversing his order, we decide first Ground in favour of the assessee . Addition on notional interest - Held that:- We find that the AO had added a sum of ₹ 34, 038/- to the income of the assessee on notional basis. In our opinion, if the income has not accrued/received by the assessee it cannot be added to its income, unless provided in the provisions of the Act. We agree with the assessee that the Act does not provide for taxing the notional interest income. Secondly the AO is not supposed to step into the shoes of the assessee to decide as to how much interest it should charged. Therefore, reversing the order of the FAA we decide Ground in favour of the assessee .
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