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2020 (10) TMI 134 - AT - Income TaxDisallowance u/s 14A - assessee earned exempt income but did not make any disallowance u/s 14A - assessee submitted that the majority of its investments were made in the earlier years and further the loans taken during the year under consideration were used for general business purposes - HELD THAT:- If the interest free funds available with the assessee is more than the value of investments, then the presumption is that the assessee has used interest free funds for making investments. This view is supported by the decision rendered in the case of Reliance Industries Ltd.[2019 (1) TMI 757 - SUPREME COURT]. There should not be any dispute that, if the assessee is able to demonstrate that the interest free funds available with the assessee is more than the value of investments and further the loan funds have not been used to make the investments, then no disallowance out of interest expenditure is called for under rule 8D(2)(ii). Since the factual details relating to the issue require examination, we are of the view that the assessee, in the interest of natural justice, should be provided with an opportunity to present its case to the A.O. With regard to the disallowance of administrative expenses made under rule 8(D)(iii), it is the submission of the assessee that the majority of expenses debited to Profit & loss account are not related to the exempt income and further the expenses relatable to the exempt income could be identified and the same is lower than the amount computed by the A.O. u/r 8D(2)(iii). This contention of the assessee also require examination at the end of the A.O. This issue requires fresh examination at the end of the A.O. Assessee appeal allowed for statistical purposes.
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