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2020 (6) TMI 322 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - assessee has earned dividend income - assessee made suo-motu disallowance under section 14A - HELD THAT:- For disallowance under Rule 8D(2)(i) and (ii), the disallowance made by AO was unwarranted. Demat charges were related to assessee’s Share Broker business and were unrelated to earning of exempt income. As regards interest expenditure, the assessee has shown from the Balance Sheet as on 31/3/2012, that own funds of the assessee were much more than the investments made. It is a well settled legal proposition that were both, interest bearing and own interest free funds are available, it shall be presumed that investments are made from own funds. Disallowance made under rule 8D (2)(i) & (ii) were uncalled for. In so far as disallowance under rule 8D (2)(iii) is concerned, the assessee has made suomotu disallowance of ₹ 10,000/- as against dividend income of ₹ 1,21,155/-. Apex Court in the case of PCIT v. State Bank of Patiala [2018 (11) TMI 1565 - SC ORDER] has approved that disallowance under section 14A r.w. Rule 8D(2)(iii) cannot exceed the exempt income earned. We find no merit in ground No.1 of the appeal, the same is dismissed, accordingly. Disallowance of Client referral fees - HELD THAT:- A perusal of the table furnished by the assessee clearly indicates that percentage of the fees paid in each year varies and there is no fixed pattern of payment of Client referral Fees. AO should have examined genuineness of the payments made rather than estimating by applying percentage of the earlier assessment year. In the facts of the case, we deem it appropriate to restore this issue back to the file of AO to verify genuineness of the payments made to the parties concerned. AO while verifying genuineness of the payments, shall grant reasonable opportunity of hearing to the assessee, in accordance with law. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT:- Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited [2020 (5) TMI 359 - ITAT MUMBAI]
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