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2022 (12) TMI 280 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - necessity of recording of satisfaction by the AO - HELD THAT:- AO on an examination of accounts of the assessee was of the opinion that the assessee did not apportion any expenditure relating to the exempt income and not satisfied with the claim of assessee that no expenses were incurred to earn its exempt income, proceeded to work out by applying Rule 8D, disallowed expenditure under Rule 8D(ii) & (iii), respectively. AO clearly recorded its non-satisfaction with regard to accounts of assessee of the assessment order. CIT(A) confirmed the view of AO recording of non-satisfaction regarding the accounts of assessee. On perusal of finding of AO regarding recording of non-satisfaction with regard to accounts of assessee relating to exempt income, we do not find any infirmity in the order of CIT(A) in holding that the AO recorded its satisfaction of the impugned order. Therefore, the submissions of AR are rejected and ground No. 1 raised by the assessee is dismissed. Seeking direction to AO to restrict the disallowance u/r 8D concerning the investments yielded exempt income - Disallowance under Rule 8D(ii) to an extent of Rs.1,78,490/- is not maintainable. Therefore, the order of CIT(A) is not justified in confirming the disallowance under Rule 8D(2)(ii) on account of interest expenditure and to that extent the order of CIT(A) is set aside. Coming to the disallowance under Rule 8D(2)(iii) to an extent of Rs.5,40,395/-, note that the ld. AR contended to remand the issue to the file of AO for computation of disallowance concerning the investments which yielded exempt income. AO did not examine the said disallowance on this aspect and proceeded to disallow at 0.5% on an average value of investments concerning the first day and last day of previous year to an extent of Rs.10,80,79,007/-. It is settled principle to restrict the disallowance to those investments earned dividend income. Therefore, following the same direct the AO to compute the disallowance taking into consideration those investments which yielded exempt income. The assessee is liberty to file evidence, if any, in this regard. Thus, alternative ground No. 3 raised by the assessee is allowed for statistical purpose.
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