Held that the Demat charges which are in the nature of direct expenses, same are disallowable under R. 8D(2)(i). As regards interest disallowance id concerned since assessee’s own funds (share capital plus reserves) exceed the investment which yielded dividend income, disallowance of interest expenditure under r. 8D(2)(ii) is not warranted. Disallowance under R. 8D(2)(iii) is to be restricted to 0.5 per cent of the average value of investment which yielded exempt income. (AY. 2012-13)
Modi Rubber Ltd. v. DCIT (2024) 228 TTJ 848 / 236 DTR 145 / 38 NYPTTJ 212 (Delhi)(Trib)
S.14A : Disallowance of expenditure-Exempt income-Apportionment of expenses-Demat charges-Interest expenses-Disallowance under R. 8D(2)(iii) is to be restricted to 0.5 per cent of the average value of investment which yielded exempt income in terms of statutory formula-The suo motu disallowance, no basis has been given by the assessee for making such ad hoc disallowance-AO shall be guided by the statutory formula. [R.8D(2)(ii)]