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2022 (1) TMI 733 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - assessee submitted that the corporation had earned dividend income during the year and no expenditure had been incurred to earn the dividend income as the investments have been made out of own funds comprising share capital and accumulated profits - The HELD THAT:- Disallowance under rule 8D(2)(ii), on examination of the financial statements for the relevant AY as well as previous FYs, we find that the assessee has sufficient own funds to make the investments on which the assessee had earned exempt income during the AY. We find that there is increase in the non-current investments and further, there is increase in the own funds, which is evident from trading and P&L Account of the assessee, which is more than the investments made during the year. After considering the sale of investments and also perusing the orders of coordinate bench for AYs quoted supra wherein the coordinate bench held that the assessee had made the investments out of own funds of the assessee company, we direct the AO to delete the addition made under rule 8D(2)(ii). Disallowance under rule 8D(2)(iii) - contention of the assessee is that it has not incurred any expenditure for earning exempt income is also not tenable because for earning of income & maintaining portfolio, administrative involvement and expenditure cannot be denied. We therefore remit this issue back to the file of the AO with a direction to compute the disallowance under this limb by considering the investments which yielded exempt income only during the year instead of taking average value on entire investments. The assessee is directed to substantiate its claim before the AO for true and correct calculation of the disallowance under rule 8D(2)(iii) of the Act. Profit on sale of investments - Addition u/s Capital gain - assessee submitted that the matter may be restored to the file of the AO to substantiate its claim by way of documentary evidence to enable the AO to calculate the exact capital gains - HELD THAT:- We remit this issue to the file of the AO with a direction to decide the issue after examining the documentary evidence which will be put-forth by the assessee before him and in accordance with law after providing reasonable opportunity of hearing to the assessee. The assessee is directed to substantiate its claim before the AO with all the relevant evidences; at its own risk and responsibility to be followed by three effective opportunities of hearing. Accordingly, this ground is allowed for statistical purposes.
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