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2019 (10) TMI 703 - AT - Income TaxDisallowance u/s 14A read with Rule 8D - disallowance of interest expenditure incurred by assessee for earning of exempt income - CIT(A) restricted the disallowance under Rule 8D(2)(iii) being 0.5% of average value of investments - HELD THAT:- Assessee’s interest free funds available are more than the investment made in the instruments giving tax free income i.e. the dividend. It is also a fact that the assessee has earned dividend income. Hence, in view of the above fund position we are of the view that in view of the decision of Hon'ble Bombay High Court in the case of HDFC Bank Ltd vs. DCIT [2014 (8) TMI 119 - BOMBAY HIGH COURT] the presumption of investment in instrument giving rise to exempt income is out of interest free funds available with the assessee is in favor of assessee. Hence, we are of the view that the CIT(A) has rightly deleted the addition and we confirm the same. Disallowance of expenses relatable to exempt income under section 14A read with Rule 8D(2)(iii) of the Rules, being administrative expenses - HELD THAT:- We remand this issue back to the file of the AO, who will examine the facts of the case and will disallow the expenses relatable to exempt income by computing 0.5% of average value of investment under Rule 8D(2)(iii) of the Rules, only qua the investments which give exempt income. The AO will restrict the disallowance to that extent only. The issue of the assessee’s appeal is restored back to the file of the AO. Addition made on account of interest income on accrual basis instead of due basis - HELD THAT:- CIT(A) allowed the claim of assessee by relying on the decision of Hon’ble Bombay High Court on assessee’s own case [2013 (2) TMI 893 - BOMBAY HIGH COURT ] as well as on various Tribunal judgments in assessee’s own case Disallowance of broken period interest which was added as capital expenditure by the AO - HELD THAT:- Respectfully following the Tribunal decision in assessee’s own case for earlier years, we upheld the order of CIT(A) deleting the disallowance of broken period interest. This issue of Revenue’s appeal is dismissed.
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