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2020 (11) TMI 762 - AT - Income TaxDisallowance u/s 14A read with Rule 8D - AR submitted, no disallowance of interest expenditure under Rule 8D(2)(ii) can be made as no interest bearing fund was invested in exempt income yielding asset - HELD THAT:- Claim of the assessee requires factual verification, in case it is found that the assessee had sufficient interest free funds available with it which can take care of investment made in exempt income yielding assets, no disallowance of interest expenditure under Rule 8D(2)(ii) can be made. AO is directed to factually verify assessee’s claim in this regard. In so far as, disallowance of administrative expenditure under Rule 8D(2)(iii) is concerned, it is the contention of the assessee that for availing loan from a co-operative bank, the assessee mandatorily has to invest in shares of the bank. As submitted, the dividend income earned on such shares are directly credited to the bank account of the assessee and hence, the assessee is not required to incur any expenditure for earning dividend income. Whether or not the assessee has incurred any expenditure has to be established through supporting evidence. In any case, as per section 14A(3) whether or not the assessee has incurred any expenditure for earning exempt income, a part of the expenditure has to be attributed towards earning of exempt income - assessee has not been able to establish on record that no expenditure is attributable towards earning of exempt income. Therefore, in our considered opinion, disallowance of administrative expenditure has to be made under Rule 8D(2)(iii) of the Act. However, such disallowance has to be computed by taking into consideration only those investments which have yielded exempt income during the year - Assessee appeal is allowed for statistical purposes.
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