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TMI Blog2013 (7) TMI 359X X X X Extracts X X X X X X X X Extracts X X X X ..... ,38,000/= made under section 14A of the Income Tax Act without appreciating the facts that the assessee claimed dividend income of Rs. 15,68,330/= and administrative expenditure of Rs. 1,20,000/= exempt from tax which was taxable in earlier years would not make the assessee company eligible for deduction during subsequent years when dividend income become exempt ?" {B} "Whether the Tribunal is right in law and on facts in confirming the order of the CIT [A] in deleting the disallowance of Rs. 10,94,242/= of software expenses without appreciating the facts that the assessee failed to furnish the nature of software during the course of assessment ?" 2. We have heard learned counsel Ms. Mauna Bhatt for the Revenue and examined at length, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, investment made for earning exempted income of dividend, being made from interest bearing funds, section 14A of the Act would come into picture and there needs to be disallowance. This was done relying on decision of ITAT rendered in case of H.K Bhatt v. Incometax Officer, reported in [2002] 91 ITD 311. 3.3 When challenged before CIT [A], it favoured the assessee by holding that the appellant had interest free funds much larger to the investment yielding exempted income. Therefore, CIT {A} was of the opinion that the decision relied upon by the Assessing Officer of the Tribunal was on the misplaced facts. Moreover, no specific expenditure has been pinpointed in realizing the dividend income. Accordingly, the Assessing Officer's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exempt income. In view of the aforesaid facts, we are of the considered opinion that no disallowance u/s. 14A r.w Rule 8D can be invoked in the present case. We therefore, direct to delete the addition made by the A.O primarily because of the reason that the assessment year under appeal is 19992000 and in view of Godrej Boyce [Supra], Rule 8D is to be applied prospectively from assessment year 200809 onwards." 4. Learned counsel Ms. Mauna Bhatt has fervently urged that the Tribunal had held the funds to be mixed funds and therefore, disallowances had been rightly made by the Assessing Officer, which were not to be disturbed. The Tribunal's holding that Rule 8D could not have been invoked is contrary to its own finding, and therefore, dele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since the same had been expended from interest free funds, though spent for earning exempt dividend income. It is not the question of the total sum of Rs. 471 lacs, but, a limited sum that has been spent for earning the exempt income, therefore, as rightly held, when there was interest free funds available with the assessee, there does not arise a question of disallowing expenditure under Section 14A of the Act. 7. Resultantly, the issue does not require interference. 8. Moreover, specific findings of the Tribunal that the Assessing Officer has failed to establish nexus between the borrowed funds and the investment and that the specific averment of the assessee has not been rebutted by the Assessing Officer that the investment had been m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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