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2020 (2) TMI 560 - AT - Income TaxAddition u/s 14A - exempt dividend income - proximate relationship between the expenditure incurred and the dividend income earned - HELD THAT:- As the assessee has not maintained separate books of account or not identified expenses separately towards earning the exempt income, there is no alternative expect estimation. The assessee has estimated the disallowance on the basis of estimation of man hours spent towards the investment in mutual fund activity. The ld. AO has estimated the expenditure for earning exempt income in proportion of exempt income to total income including exempt income. CIT(A) has estimated the disallowance at 5% of exempted income. We find the legislature has approved the similar disallowance for administrative expenses w.e.f. assessment year 2008-09 under Rule 8D(2)(iii) as (0.5%) of average investment in assets yielding exempt income. Hon’ble Delhi High Court in the case of ACB India Ltd. Vs. ACIT [2015 (4) TMI 224 - DELHI HIGH COURT] and the Special Bench of the Tribunal in ACIT Vs. Vireet Investment Pvt. Ltd. [2017 (6) TMI 1124 - ITAT DELHI] , has restricted the disallowance towards administrative expenses under Rule 8D(2)(iii) to 0.5% of the assets which yielded exempt income during the year. In our opinion, the estimation of 0.5% of assets which yielded exempted income during the year would be a most reasonable estimate for identifying the administrative expenditure for earning the exempt income. We, accordingly, direct the Assessing Officer to compute the disallowance in view of our above direction, however, the disallowance, if any, computed in this manner should be restricted to disallowance of ₹ 23,55,952/-, which was made by the Assessing Officer in original assessment proceedings - Appeal of assessee is accordingly allowed for statistical purposes.
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