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2018 (5) TMI 1748 - AT - Income TaxDisallowance u/s. 14A r.w.r. 8D - Held that:- As seen from the order of the AO as well as the CIT(A), there is no fin ding that assessee has incurred any expenditure for earning the said dividend income. There was no diversion of borrowed funds, hence there is no disallowance interest under Rule 8D(2)(ii). Coming to disallowance under Rule 8D(2)(iii) disallowance of ½% of average value of investment, some proportionate expenditure can be disallowed but in no case, it should exceed the amount earned claiming exemption - the disallowance under Rule 8D cannot exceed the dividend income earned and claimed as exempt. Therefore, the disallowance worked out under Rule 8D(iii) being administrative expenditure is restricted to the amount of dividend earned. AO is directed to modify accordingly. Ground is partly allowed.
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