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2023 (1) TMI 359 - AT - Income TaxDisallowance of expenditure u/s 14A r.w.r. 8D - disallowance of interest expenditure under Rule 8D(2)(ii) - HELD THAT:- When the assessee has factually demonstrated that it had sufficient interest free fund available with it to take care of the investment, as per the settled legal principles, no disallowance of interest expenditure could have been made under Rule 8D(2)(ii). Accordingly, we delete the disallowance of interest expenditure made under Rule 8D(2)(ii). As regards the disallowance of administrative expenditure under Rule 8D(2)(iii), undisputedly in the year under consideration the assessee had earned exempt income. Whereas suo motu assessee has not made any disallowance under section 14A read with Rule 8D. In the course of assessment proceedings the AO had called upon the assessee to explain the reason for not making any disallowance. Though, the assessee filed its explanation, however, the Assessing Officer after recording his satisfaction regarding claim of the assessee has proceeded to make the disallowance. Therefore, he has complied with the provisions of Section 14A(2) of the Act. We uphold the disallowance made under Rule 8D(2)(iii). This ground is partly allowed. TDS u/s 195 - Disallowance u/s 40(a)(i) - assessee had paid an amount to some non-residents towards patent charges - Commissioner(Appeals) upheld the disallowance made by AO though, by treating the payment made as Fee for Technical Services (FTS) under section 9(i)(vii)(b) - HELD THAT:- We find that assessee’s submissions have not been considered property in the context of facts and materials brought on record relating to the payment made. Further, the departmental authorities have taken divergent views regarding the nature of payment. While the Assessing Officer has treated the payment as royalty, learned Commissioner (Appeals) has treated it as FTS. This shows lack of application of mind to the facts and materials on record to ascertain the exact nature of payment. In view of the aforesaid, we are inclined to restore the issue to the Assessing Officer for fresh adjudication after providing due opportunity of being heard to the assessee. Further, we make it clear, to establish its claim, if the assessee wants to furnish further evidences, the Assessing Officer must allow the assessee to do so. This ground is allowed for statistical purposes.
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