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2017 (6) TMI 69 - AT - Income TaxDisallowance under section 14A - Held that:- What is relevant to examine is whether any expenditure sought to be disallowed had actually been incurred in earning the dividend income. The AO has not brought on record any material to show that the assessee has incurred any expenditure in relation to the income which do not form part of the total income. No reasonable nexus between the expenditure disallowed and the dividend income received has been established by the AO. It is equally relevant to note that out of ₹ 30.82 crores worth of investments in subsidiary/associate concerns, an amount of ₹ 6.50 lacs has been invested during the year out of company’s own funds and the rest all investments have been made in the earlier years wherein the AO has not established any reasonable nexus between the expenditure disallowed and the dividend income received in the respective years. Further, in earlier years, the Coordinate Benches have decided the matter in favour of the assessee company holding no disallowance under section 14A other than the administrative expenses suo-moto disallowed by the assessee company and we see no reason to deviate from the same. AO has lost sight of the fact that the assessee company is in the business of financing wherein the funds are borrowed and lend as part of its regular business activity. Therefore, looking at interest expenditure of ₹ 180.91 crores without taking into consideration interest earned on loans/advances to its customers amounting to ₹ 370.69 crores will not be factually correct. - Decided against revenue
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