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2016 (10) TMI 345 - AT - Income TaxDisallowance u/s 14A r.w.r 8D -- Held that:- AO invoked provisions of Rule 8D of Income Tax Rules, 1962 for making and estimating disallowance. Therefore the basis of disallowance was not correct and bad in law as Rule 8D applies from asstt. year 2008- 09 onwards. Thus we inclined to hold that no material has been brought on record by the AO to show that the interest expenditure was incurred for the purpose of investment earning exempt income. At the same time, we also observed that the Ld. DR could not controvert this factual position that there is no expenditure on interest and there is some interest income shown by the assesse in both the years. As we have already noted that Rule 8D of Income Tax Rules is not applicable for asstt. year 2006-07 and 2007-08 which was wrongly applied by the AO for estimating this amount. The AO has not controverted the ratio adopted by assessee in making suo moto disallowance i.e ratio of dividend income to total income. Therefore, we decline to accept basis adopted by the AO for making disallowances. Per contra, at the same time we are in full agreement with the conclusion of the Ld. CIT(A) wherein he restricted the disallowance u/s 14A of the Act to the ratio of the dividend income to total income of the assessee during the relevant financial period. Hence we are unable to see any valid reason to interfere with the conclusion of the first appellate authority on this issue and thus we uphold the same. It is also relevant to mention here that the facts and circumstances of asstt. year 2006-07 and 2007-08 and quite similar therefore, our conclusion based on the facts and asstt. year 2006-07 would apply mutatis mutandis to asstt. year 2007-08 also. - Decided against revenue
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