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2013 (8) TMI 836 - AT - Income TaxDisallowance u/s 14A - Expenditure incurred for earning of exempt income - Held that:- It is not in dispute that the assessee has earned huge dividend income which has been claimed as exempt and for the purpose of disallowance under section 14A, it has disallowed a sum of Rs.5,46,16,385. The assessee’s working of disallowance was too based on rule 8D. However, in its working, the assessee has not considered those investments which have not yielded any income. In our opinion, such a working is not correct, as once the expenditure has been incurred in relation to an income which do not form part of the total income, then the provisions of section 14A, comes into play - it has been held that disallowance under section 14A can also be made in the year in which no exempt income has been earned or received by the assessee. When the expenditure is incurred in relation to income which does not form part of the total income, it has to suffer the disallowance under section 14A, irrespective of the fact that whether or not any income has been earned by the assessee. The section itself does not carve out any such exception - Once it is not disputed that the provision of rule 8D are applicable on the conditions stated therein, then disallowance has to be made as per the formula given in rule 8D, except when the assessee brings out cogent material on record to show that a particular expenditure as provided in the formula was not attributable to earning of the exempt income - Following decision of Cheminvest Limited. Versus Income Tax Officer, Ward 3(3), New Delhi. [2009 (8) TMI 126 - ITAT DELHI-B] - Decided against assessee.
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