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2023 (3) TMI 1110 - AT - Income TaxRectification of mistake u/s 154 - computation of disallowance u/s 14A r/w Rule 8D - HELD THAT:- We find that in CIT vs HDFC Bank Ltd., [2014 (8) TMI 119 - BOMBAY HIGH COURT] held that where assessee’s own funds and other non–interest bearing funds were more than the investment in tax-free securities, no disallowance u/s 14A of the Act can be made. We further find that in South Indian Bank Ltd. [2021 (9) TMI 566 - SUPREME COURT] held that disallowance under section 14A of the Act would not be warranted where interest-free own funds exceed the investment in tax-free securities and in such a case the investment would be presumed to be made out of assessee’s own funds. Therefore, AO is directed to delete the disallowance made under section 14A r/w Rule 8D(2)(ii). In the present case, it is undisputed that during the year, the assessee earned exempt income totaling Rs.11,20,109. We find that in Nirved Traders (P.) Ltd. [2019 (4) TMI 1738 - BOMBAY HIGH COURT] has held that disallowance under section 14A of the Act cannot be more than exempt income. Therefore, AO is directed to restrict the disallowance made under section 14A r/w Rule 8(2)(iii) to the exempt income earned by the assessee. Grounds challenging the assumption of jurisdiction under section 154 of the Act are dismissed.
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