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2022 (1) TMI 678 - AT - Income TaxAddition u/s 14A r.w.r 8D - disallowance made by invoking Rule 8D(2)(iii) of the I.T. Rules is for administrative and common expenses when the assessee derives exempted income - HELD THAT:- In the instant case, in each of the assessment year’s huge investments are made which is given rise to exempted dividend income. Investment decisions are very complex and strategic which requires administrative support. Assessee would have incurred administrative expenses such as salary, wages, general expenses, stationery etc. Therefore, it cannot be said that no expenditure was incurred for making the said investments. Hence, we confirm the disallowance made by the AO by invoking provisions of section 14A of the I.T. Act r.w. Rule 8D(2)(iii) of the I.T. Rules. Disallowance of indirect interest expenditure by invoking the provisions of section 14A of the I.T. Ac r.w. Rule 8D(2(ii) - Admittedly, interest on borrowed funds used for business purposes cannot be computed for disallowance u/s. 14A of the I.T. Act r.w. Rule 8D(2)(ii) of the I.T. Rules. It is the duty of the assessee to prove that interest was incurred on borrowings are used for the specific business purpose and non-interest bearing funds were utilized for making investments which has given rise to exempted income. The assessee to prove that it is having its own funds to make investment which had yielded exempted income, necessarily has to furnish cash flow statement. The cash flow statement would disclose as on the date of making investments, which had given rise to the exempted income, that the assessee had interest free funds available with it. In the interest of justice and equity, we deed it fit to remand the case to the Assessing Officer for fresh consideration. Grounds raised by assessee stands allowed for statistical purposes.
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