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2016 (6) TMI 205 - AT - Income TaxDisallowance u/s 14A - investment in shares/mutual funds/partnership firms, the income of which is tax free - disallowance of indirect expenditure for earning tax free dividend income - Held that:- Since the assessee in the instant case has conclusively proved that it s own capital and free reserves is far more than the investment in shares/mutual funds/partnership firms, the income of which is tax free, therefore, respectfully following the decision of the Hon’ble Bombay High Court in the case of HDFC Bank Ltd. [2016 (3) TMI 755 - BOMBAY HIGH COURT ] we hold that no disallowance u/s.14A r.w. Rule 8D(2) is called for on account of disallowance of interest. So far as the disallowance of indirect expenditure for earning tax free dividend income is concerned we find there is no objective satisfaction recorded by the AO which is one of the mandates of section 14A(2) of the I.T. Act. Neither there is any discussion by the AO nor any specific query raised by the AO to the assessee on this issue. At the same time, there is no suo moto disallowance made by the assessee on account of the expenditure attributable to earning of the exempt income other than the expenditure on account of IPO. Although the assessee has neither disallowed any expenditure on this account in the computation statement presumably on the ground that no expenditure has been incurred and although the AO has also not specifically discussed this issue in the body of the assessment order, however, it cannot be said that no expenditure has been incurred by the assessee for earning the tax free income. Considering the totality of the facts of the case, we are of the considered opinion that disallowance of ₹ 10 lakhs on adhoc basis on account of expenditure attributable for earning tax free income will meet the ends of justice - Decided partly in favour of assessee
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