S. 14A & Rule 8D Disallowance Cannot Exceed Total Expenditure
In
AY 2008-09, the assessee earned tax-free dividend income. Its’ total
expenditure as per the P&L A/c was Rs. 49 lakhs. The AO applied Rule
8D and made a disallowance u/s 14A of Rs. 2.37 crores which was reduced
by the CIT (A) to Rs. 1.78 crores. Before the Tribunal, the assessee
claimed that
even assuming that the entire expenditure had been
incurred to earn the dividend, the disallowance u/s 14A & Rule 8D
could not exceed the expenditure incurred. HELD accepting the plea:
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