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2024 (2) TMI 1043 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - dividend income - AO rejecting the suo-motto disallowance made by asseessee - contention of the assessee is that had the AO excluded the non-dividend bearing investments and investment made out of non-interest bearing fund, no disallowance would have been called for - CIT(A) has sustained the additions to the extent of exempt income without adverting to the contentions of the assessee regarding exclusion of investments that did not earn dividend income, investments that earned taxable income and investments that were made out of interest free own funds. HELD THAT:- There is no ambiguity under the law that Section 14A of the Act casts statutory obligation on the Assessing Authority to verify and satisfy itself about the correctness of claim of the assessee regarding suo-motto disallowance or no disallowance at all in relation to expenditure incurred for earning of exempt income. If the AO fails to give clear finding, he would be failing into statutory obligation. In the present case, the AO had not adverted to the objections of the assessee and did not accept the suomotto disallowance made by the assessee. AO failed to take into account that the assessee was having interest free fund. Certain investment did not earn exempt income and some investment in foreign entities were amendable to tax in India. AO did not give any cogent reason for rejecting the suo-motto disallowance. Thus disallowance made by AO and restricted by CIT(A) to the extent of exempt income, is not justified. We therefore, direct the AO to delete the impugned addition. Appeal of assessee allowed.
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