Rule 8D disallowance can be capped at the expenditure actually claimed when the Assessing Officer lacks proper dissatisfaction finding.

Disallowance of expenditure relatable to exempt income under Rule 8D was held capable of being restricted to the expenditure actually claimed by the assessee where the Assessing Officer applied the formula without a proper dissatisfaction finding. The assessee had no interest expenditure and had already made a voluntary disallowance, which the Tribunal accepted. The Court noted that the Revenue's method would produce a disallowance far exceeding the assessee's own expenditure claim, and therefore upheld the restriction of the disallowance to the amount claimed.

---

---

Issues: Whether the disallowance of expenditure relatable to exempt income under Rule 8D could be restricted to the amount of expenditure claimed by the assessee when the Assessing Officer had applied the formula under the rule.

Analysis: The statutory scheme requires the Assessing Officer to record dissatisfaction with the correctness of the assessee's claim before applying the prescribed method. On the facts, the assessee had no interest expenditure, had already voluntarily disallowed a portion of its expenditure, and the Tribunal accepted that working. The Court also noted that the Revenue's approach would produce a disallowance far exceeding the expenditure claimed by the assessee itself.

Conclusion: The restriction of the disallowance to the expenditure claimed by the assessee was upheld, and the Revenue's challenge failed.

---