Assessee company made suo motu disallowance u/s. 14A r.w.r. 8D, which was much more than the exempt income. The AO enhanced the disallowance by recomputing amount u/r. 8D(2)(ii) and 8D(2)(iii). The Tribunal observed that Assessee’s own funds were higher than investments and that disallowance could not be made u/r. 8D(2)(ii). It further held that the disallowance u/s. 14A could not exceed the exempt income, notwithstanding that Assessee’s suo-motu disallowance was more than exempt income. (AY. 2012-13)
Gold Seal Engineering Products P. Ltd. v. ACIT (2018) 66 ITR 37 (SN)(Mum.) (Trib.)
S. 14A : Disallowance of expenditure – Exempt income – Disallowance cannot exceed exempt income notwithstanding Assessee’s suo-motu disallowance is more than exempt income. [ R.8D ]