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2019 (6) TMI 33 - AT - Income TaxDisallowance u/s 14A r/w rule 8D - restrict the disallowance u/s 14A to the exempt income earned by the assessee in respective assessment years - HELD THAT:- Undisputedly, the exempt income earned by the assessee during the assessment year 2013–14, was ₹ 48,865 and in assessment year 2014–15, was ₹ 1,08,136. Whereas, the AO has made huge disallowance by invoking the provisions of rule 8D(2)(iii). Now, it is fairly well settled that the disallowance under section 14A r/w rule 8D cannot exceed the quantum of exempt income earned during the year. No reason to interfere with the decision of the learned Commissioner (Appeals) in directing the Assessing Officer to restrict the disallowance under section 14A of the Act to the exempt income earned by the assessee in respective assessment years. MAT computation - disallowance made while computing the book profit under section 115JB - HELD THAT:- It is evident that the AO has made such disallowance by resorting to the provisions of section 14A r/w rule 8D. As per the ratio laid down in Vireet Investment [2017 (6) TMI 1124 - ITAT DELHI] AO while computing the book profit u/s 115JB cannot make any disallowance by making reference to the provisions of section 14A r/w rule 8D. AO retains the power to make disallowance of expenditure incurred for earning exempt income as per Explanation–1(f) of section 115JB of the Act. Therefore, the disallowance made by the Assessing Officer while computing book profit under section 115JB(2) of the Act is unsustainable. AO directed to examine and quantify the expenditure incurred by the assessee for earning exempt income in terms of Explanation–1(f) of section 115JB of the Act without taking aid of rule 8D(2) r/w section 14A of the Act. Grounds no. (i) and (ii) in both the appeals are dismissed and ground no. (iii) is partly allowed for statistical purposes.
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