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2018 (1) TMI 699 - AT - Income TaxDisallowance of interest expense u/s 40A(2)(b) - Held that:- Order of the AO suffers from factual errors. One such error would be that secured loans have been considered as having been diverted by the assessee for non business purposes. Secured loans were taken from the bank for specified business purposes and because of the rigid norm of the bank they cannot be diverted for any other purpose. This aspect has been over looked by the AO. Besides the above the AO has made disallowance on imaginary average rate of interest on borrowings and investments. CIT(A), in our view, rightly considered the action of the AO as not proper. - Decided against revenue Disallowance u/s 14A rule 8D(2)(iii) - CIT(A) restricted the disallowance to ₹ 15,500/- under Rule 8D(2)(iii) and deleted the disallowance on interest expenses on the basis of the finding that assessee had sufficient own funds which were more than the investments in shares which are likely to yield exempt income under Rule 8D(2)(iii)- Held that:- In the submissions made by the assessee before CIT(A) the assessee has taken a stand that there cannot be any disallowance u/s 14A of the Act because the assesee had not earned any tax free income during the previous year. This submission is not being considered in this appeal by the revenue. We make it clear that the conclusion in this appeal are confined to the grounds raised by the revenue on the factual details given by CIT(A) which remained uncontroverted . We are of the view that the disallowance on interest expenses made by CIT(A) was just and proper and calls for no interference. Consequently ground no.2 raised by the revenue is also dismissed.
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