Section 14A administrative expense disallowance restricted to 2% of exempt income on identical facts.

Administrative expenditure disallowance under section 14A read with rule 8D(2)(iii) was considered in light of the assessee's suo motu computation and the Assessing Officer's higher disallowance. Following its earlier order on identical facts in the assessee's own case, the Tribunal applied the same approach and restricted the disallowance to 2% of the exempt dividend income. The adjustment was thus limited to the lower figure adopted on the basis of the earlier precedent and the factual matrix.

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Issues: Whether the disallowance under section 14A read with rule 8D(2)(iii) was required to be restricted to 2% of the exempt income.

Analysis: The assessee had already made a suo motu disallowance under rule 8D(2)(iii), while the Assessing Officer made a much higher disallowance. The Tribunal followed its earlier order in the assessee's own case on identical facts, where the administrative expenditure attributable to exempt income was restricted to 2% of the dividend income. As the facts for the year under consideration were stated to be the same, the same approach was applied.

Conclusion: The disallowance under section 14A read with rule 8D(2)(iii) was restricted to 2% of the exempt income, in favour of the assessee.

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