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2021 (4) TMI 787 - KARNATAKA HIGH COURTDisallowance u/s 14A r.w.r 8D(2)(ii) and 8D(2)(iii) -Tribunal deleted the addition - as per revenue Board's Circular No.5/2014 dated 11.02.2014 , which emphasizes that the only expenditure allowable is which is relatable to earning of income and therefore, the expenses which are relatable to earning of exempt income have to be considered for disallowance, irrespective of the fact whether any such income has been earned during the financial year or not? - HELD THAT:- It is evident that the capital and reserves of the company are far in excess of the investment made. Therefore, the presumption arises that such investments have been made from capital and reserves of the company and from non interest bearing funds and not out of borrowed funds to warrant any disallowance while computing the income. [See: Reliance Utilities and Power Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT] and Lalsons enterprises [2010 (4) TMI 98 - DELHI HIGH COURT]. It is also pertinent to mention here that the Assessing Officer has not recorded the satisfaction that assessee had incurred expenditure to earn exempt income as envisaged under Rule 8D(1) of the Rules. There is no positive material to show that the assessee had incurred such expenditure to earn exempt income. Commissioner of Income Tax (Appeals) and the tribunal therefore, have rightly deleted the disallowance under Section 14A read with Rule 8D of the Rules. The Circular No.5/2014 dated 11.02.2014 has no application to the facts of the case as the Assessment Year in question is 2009-10. In view of preceding analysis, the substantial question of law framed by a bench of this court is answered against the revenue.
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