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2018 (3) TMI 1398 - AT - Income TaxDisallowance u/s 14A read with Rule 8D - Held that:- In the instant case, the AO has not recorded any dissatisfaction as to the claim of the assessee that no expenditure was incurred to earn exempt income as per its account and in such circumstances, the computation under sub-rule (2) of Rule 8D cannot be made. In this case, undisputedly, the assessee has earned dividend income to the tune of ₹ 200/- but disallowance u/s 14A read with Rule 8D has been made to the tune of ₹ 3,71,410/-. Hon’ble Delhi High Court in Joint Investments (P.) Ltd. (2015 (3) TMI 155 - DELHI HIGH COURT) case also decided the identical issue that disallowance u/s 14A is to be made only to the extent of disallowing expenditure incurred by the assessee in relation to the tax exempt income. So, we are of the considered view that in any case, disallowance cannot be made more than exempt dividend income earned by the assessee. So, impugned order passed by the ld. CIT (A) is not sustainable in the eyes of law, hence the addition made by the AO and confirmed by the ld. CIT (A) by invoking the provisions of section 14A and Rule 8D is to be restricted to the earned exempt income i.e. ₹ 200/-. Consequently, present appeal filed by the assessee is partly allowed.
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