Section 14A disallowance limited to investments yielding exempt income, with corresponding section 115JB adjustment also deleted.

For section 14A read with Rule 8D, the disallowance was confined to investments that actually yielded exempt income during the relevant year, not all investments, and the balance disallowance was deleted. The Tribunal accepted the CIT(A)'s reliance on the co-ordinate bench ruling in Vireet Investment and found no infirmity in that approach. The same reasoning also defeated the Revenue's challenge to the corresponding adjustment under section 115JB, so the deletion was upheld in favour of the assessee.

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Issues: Whether the disallowance under section 14A read with Rule 8D could be sustained by considering all investments or had to be confined only to investments yielding exempt income, and whether the same disallowance could be added while computing book profit under section 115JB.

Analysis: The assessee had earned exempt dividend income and had already made a suo motu disallowance. The Tribunal accepted the view taken by the CIT(A) that, for the purpose of section 14A read with Rule 8D, only those investments which actually yielded exempt income during the relevant year were to be considered. The Tribunal further noted that the CIT(A) had followed the binding co-ordinate bench ruling in Vireet Investment and found no infirmity in the deletion of the balance disallowance. The Revenue's challenge to the addition under section 115JB also failed in view of the same reasoning.

Conclusion: The Revenue's grounds were rejected and the deletion of the disallowance under section 14A and the corresponding adjustment under section 115JB was upheld in favour of the assessee.

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