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2023 (8) TMI 1250 - ITAT MUMBAIDisallowance u/s 14A - AO recorded the dissatisfaction on the claim of the assessee of incurring no expenses for earning exempted income and accordingly invoked Rule 8D of the Income-tax Rules, 1962 (the Rules) and made disallowance - HELD THAT:- Once the AO records the dissatisfaction as to the claim of the assessee made in books of accounts, there is no discretion with the AO and he has to invoke Rule 8D for determining disallowance. However if the disallowance computed under rule 8D(2)(iii) exceeds the total expenses in the nature of administrative expenses claimed in the profit and loss account, then disallowance should be restricted to that amount only as disallowance cannot be made more than the expenditure claimed against composite activities of earning exempt and taxable income. In the case of the head administrative expenses administrative expenses, the assessee has claimed amount of rupees 2139.99 lakhs which being more than the disallowance under Rule 8d(2)(iii) of ₹14,58,76,907/- and therefore we do not find any absurdity in disallowance which has been computed invoking rule 8D of rules. As before us, assessee has now admitted to have incurred some expenses toward earning of the exempted income but no such disallowance has been computed by the assessee while filing return of income. In view of the fresh claim of disallowance u/s 14A for earning exempted income, we feel it appropriate to restore the issue of disallowance u/s 14A back to the file of the AO for examining the correctness of the claim of the assessee and deciding the issue in dispute in accordance with law. Ground of appeal of the assessee is accordingly allowed for statistical purposes.
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