TMI Blog2021 (3) TMI 931X X X X Extracts X X X X X X X X Extracts X X X X ..... hat disallowance of expenditure under section 14A of the Act shall not exceed exempt income earned for the year under consideration. However, in the given case, the assessee has disallowed suo-motu by following the provisions of Rule 8D(2)((iii) i.e., 0.5% on average investment. It is settled law that the administrative expenses of 0.5% under Rule-8D(2)(iii) should be on the investment which earned the exempt income. We direct the AO to calculate the disallowance under rule 8D(2)(iii) as per the above direction and restrict the disallowance to the above amount or exempt income whichever is less. Accordingly, we set aside the impugned order of the learned Commissioner (Appeals) and direct the Assessing Officer to restrict the disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,27,36,480. 4. The assessee carried the matter before the first appellate authority, wherein before the learned Commissioner (Appeals), the assessee submitted that the disallowance of ₹ 17,13,090, was made under section 14A of the Act. The dividend income earned was only to the extent of ₹ 8,550 and, therefore, the disallowance under section 14A of the Act should be restricted to the extent of exempt income earned at ₹ 8,550, and the voluntary disallowance of ₹ 17,13,090, made under section 14A of the Act at the time of filing of return of income should be ignored. In support of this contention, the assessee relied upon various decisions. The learned Commissioner (Appeals) considering the submissions of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case in which the appellant on its own has come to a conclusion that certain amount of expenditure was related to exempt income. Now the appellant wants to revise the disallowance on the basis of various judicial pronouncement of courts. The decisions quoted and relied upon by the appellant are considered. In all these decisions the disallowance was made by the AO by invoking provisions of section 14A(2) of the Act. However, in the case of the appellant, the disallowance was made under section 14A(1) of the Act. The provisions of section 14A(1) make it mandatory for the appellant to not to deduct any expenditure incurred by the appellant in relation to income which does not form part of the total income. The Income Tax Act has not prescribe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epresentative supported the order of the authorities below. 7. Considered the rival submissions and perused the material on record. The undisputed facts, as borne out from the order of the Revenue authorities clearly indicate that the assessee, during the impugned assessment year, has indeed earned dividend income to the extent of ₹ 8,550. We find that now it is a well settled principles of law that the disallowance computed under section 14A of the Act r/w rule 8D of the Rules shall not exceed the exempt income earned by the assessee. This principle of law is in conformity with the decision of the Hon'ble Delhi High Court in Cheminvest Ltd. v/s. CIT, [2015] 378 ITR 33 (Del.), wherein it has been held that disallowance of expen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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