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2021 (10) TMI 745 - ITAT AMRITSARDisallowance u/s 14A r.w.r. 8D - CIT(A) has restricted the disallowance u/s 14A to exempt income of dividend - basic contention of the assessee that although it is entitled to the deduction u/s 80P(2)(a)(i) for whole of the income earned from providing credit facilities to its members out of surplus funds is accepted by the ld. CIT(A) as the provisions of section 14A apply only to the dividend income which is exempt and not to the interest received on FDR and other investments - HELD THAT:- The allegation of the assessee that the Assessing Officer has denied deduction u/s 80P of Income Tax Act, is factually wrong and therefore there could be no grievance of the appellant in respect of claim of deduction u/s 80P. The only disallowance calculated by the Assessing Officer is by applying section 14A read with Rule 8D pertain to dividend income only. No disallowance can be made in view in the case of CIT, Jalandhar-1, Jalandhar vs. Max India Ltd [2017 (3) TMI 1254 - PUNJAB AND HARYANA HIGH COURT] where it was held that where an assessee has sufficient interest-free funds to earn exempt income no disallowance can be made under section 14A - No such effort has been made to place on record either before the Ld. CIT(A) nor before us, as to when was the investment made, what was the amount of investment made and what were the interest-free sources. In our view, mere argument that the Balance sheet for the year ending March 2015 contained paid-up share capital and reserve fund which were interest-free source is not sufficient to establish the links of the source of investment with the interest-free sources. Unless and until, the appellant organically links the source of investment with the interest-free sources, the benefit of the aforesaid decision cannot be extended. Following the case of Punjab Tractors Ltd [2017 (2) TMI 647 - PUNJAB AND HARYANA HIGH COURT] held that the presumption of using interest free funds would arise only if the assessee shows availability of funds. The case law relied upon by the assessee are distinguished on the peculiar facts of the instant case. In the case of Maxopp Investment Ltd. [2018 (3) TMI 805 - SUPREME COURT] it has been approved that the disallowance cannot be more than total exempt income. Respectfully following the Hon’ble Apex Court, the ld. CIT(A) was justified in restricting the disallowance u/s 14A equivalent to exempt income of dividend to the extent of ₹ 5,06,792/- No merit and substance in the contentions of the appellant.
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