INCOME TAX ACT, 1961

Section 14A Rule 8D

Disallowance under section 14A - Expenditure against exempt income - Applicability of rule 8D -

Assessee earned tax free dividend income but claimed no suo moto disallowance under section 14A. AO invoked rule 8D and worked out disallowance accordingly.Held: Rule 8D was not applicable during the year under consideration. Therefore, disallowance had to be computed on some reasonable estimated basis keeping in view the assessee's financials. From perusal of financial statements, it was clear that assessee had debited administration and other charges which included routine expenditure, viz. salary, telephone, conveyance, directors' remuneration, demat charges, service-tax, etc. Most of the expenditure was statutory in nature and was necessary to maintain corporate personality of assessee. Therefore, disallowance @ 10% of exempt income would meet the ends of justice.

REFERRED :

FAVOUR : Partly in assessee's favour.

A.Y. : 2006-07

INCOME TAX ACT, 1961

Section 14

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