Assessee filed its return declaring certain taxable income. Assessee had held investment in shares and mutual funds and earned dividend income therefrom. However, only a small amount was offered for disallowance in respect of earning tax free income.  In response to notice issued by Assessing Officer, assessee submitted its books of account and other documentary evidence. Assessing Officer was prima facie not satisfied with working provided by assessee in arriving at amount offered for disallowance He thus having invoked provisions of Rule 8D of 1962 Rules, read with section 14A, enhanced amount of disallowance for earning exempt income. Tribunal confirmed said order of disallowance. On appeal the Court held that   taking note of volume of investments and amount of exempt income earned thereon, Assessing Officer came to conclusion that a part of managerial remuneration and directors’ remuneration should be attributed towards dividend earning activity of assessee. Accordingly order of Tribunal is affirmed. (AY.  2009-10)