TMI Blog2016 (7) TMI 1241X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Rule 8D r.w.s. 14A(2). We further find that assessee had own funds of ₹ 14.24 crores and investment made by it stood at ₹ 11. 99 crores. Therefore, incurring of interest expenditure for making investment had to be proved by the AO. We find that he has not dealt the issue at all and mechanically applied the provisions of section 14A r.w.r 8D. For disallowing any expenditure first the AO has to prove incurring of expenditure and its relation with earning of exempt income. If the assessee has not incurred any expenditure no disallowance can be made. Assessee has made disallowance of ₹ 3.36 lakhs under the head administrative/managerial expenditure which is more than the disallowance made by AO i.e. ₹ 2.99 lakhs. - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. 3.Aggrieved by the order of the AO, assessee preferred an appeal before the First Appellate Authority(FAA). Before him, it was argued that it had made investment into various schemes of mutual funds and had earned dividend income, that the entire investment was made out of own funds,that no interest was paid for any loan to earn exempt income, that there was no investment held as on 31.03.10, that the question of investment out of borrowed funds would not arise,that it had not paid any interest except the interest for specific purposes, that no disallowance could be made when the investments were made from own funds, that the assessee had applied the provisions of section 14A(2) r.w.r 8D without considering the fact that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e investments, that AO had not assigned the reason for rejecting the disallowance made by the assessee. The Departmental Representative (DR) supported the order of the FAA. 5.We have heard the rival submissions and perused the material before us. We find that the AO had made a disallowance of ₹ 7.76 lakhs, that he disallowed an amount of ₹ 4.4lakhs on account of interest payment, that the assessee had made a suo moto disallowance of ₹ 3. 36 lakhs on prorata basis, that while making the disallowance the AO had not mentioned as to why the disallowance made by the assessee, amounting to ₹ 3,36,454/- was not acceptable . Without expressing any dissatisfaction over the method followed by the assessee for the disallowan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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