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2015 (3) TMI 1111 - AT - Income TaxDisallowance u/s 14A - Held that:- AO has to examine the nature of expenditure vis-a-vis the earning of the exempt income. Here in this case the assessee had offered ₹ 2,40,000/- for the purpose of disallowance. However, the AO without examining the same has proceeded to apply rule 8D, as if it is a natural corollary to section 14A. The basic requirement the law is to examine the nature of the expenditure which can be said to attributable for the earning of the exempt income. If the assessee has incurred major expenditure for its core business, then it is incumbent upon the AO and is mandatory for him to examine the nature of expenditure and satisfy himself about the assessee’s claim as to whether any expenditure has been incurred for the purpose of earning exempt income and then he has to quantify the expenditure. Here in this case, only clause (iii) of Rule 8D has been invoked by the AO to work out the indirect expenses, without satisfying himself about the assessee’s correctness of the claim. In absence of satisfying the mandatory requirement as given in sub-section (2) of section 14A, the disallowance offered by the assessee under rule 14A cannot be tinkered with and also it appears to be reasonable looking to the overall indirect expenditure incurred by the assessee. - Decided in favour of assessee
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