The assessee earned dividend income of Rs.1,13,72,545 which was exempt from tax. The AO disallowed interest and administrative expenditure in relation to the exempt income in a sum of Rs. 4,22,72,425 of the Act. The Tribunal confirmed the disallowances. On appeal Court held that the disallowance under section 14A read with rule 8D could not exceed the assessee’s exempt income. The disallowance under section 14A was to be limited to the extent of the dividend income earned by the assessee which was exempt from tax. (AY. 2008-09)