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2016 (6) TMI 284 - AT - Income TaxDisallowance under section 14A - Held that:- Coming to the facts of the instant appeal, it is seen that the year under consideration is assessment year 2006-07. Rule 8D was introduced by virtue of notification no.45/2008 dated 24.03.2008 and the Hon'ble Delhi High Court has held it to be prospective in operation in the case of Maxopp Investment Ltd. vs CIT (2011 (11) TMI 267 - Delhi High Court ). The Assessing Officer calculated the disallowance u/s 14A by adopting the procedure given in Rule 8D and also made a similar disallowance while computing book profits u/s 115JB of the Act. CIT (A) restricted the disallowance both under Rule 8D and u/s 115JB to ₹ 1,18,04,860/-. It is the assessee’s plea that the dividend income (exempt income) earned during the year was only ₹ 34,562/- and the disallowance in any case could not have exceeded the exempt income. We are in total agreement with the contention of the Ld. AR that Rule 8D could not have been applied in assessment year 2006-07. We also concur with the contention of the Ld. AR that the disallowance in any case cannot exceed the exempt income. Therefore, on the facts of the case and respectfully following the ratio laid down by the Hon’ble Delhi High Court in Maxopp Investment Ltd. vs. CIT (supra), we set aside the order of the Ld. CIT (A) and direct the Assessing Officer to re-compute the disallowance restricting it to the amount of dividend earned during the year. The issue is restored to the file of the Assessing Officer for the limited purpose of verification of the dividend income earned by the assessee during the year. - Decided in favour of assessee
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