Section 14A disallowance: scientific computation by the assessee was accepted, and further enhancement was rejected.

The assessee's disallowance relating to exempt income was accepted because it was computed on a scientific basis by allocating salary cost for investment-related personnel and factoring in time spent on purchase and sale transactions. On those facts, there was no basis to invoke the statutory machinery under section 14A(2) read with Rule 8D(ii) to enhance the disallowance, and the further addition was deleted in favour of the assessee.

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Issues: Whether the Revenue was justified in invoking section 14A(2) read with Rule 8D(ii) to enhance the disallowance made by the assessee in relation to exempt income.

Analysis: The assessee had computed the disallowance on a scientific basis by allocating the salary cost of personnel engaged in investment related activity and considering the time spent on purchase and sale transactions. On the facts, the assessee's own disallowance was treated as sufficient and there was no basis to disturb it by resorting to the statutory machinery under section 14A(2).

Conclusion: The invocation of section 14A(2) read with Rule 8D(ii) was not warranted and the deletion of the further disallowance was upheld in favour of the assessee.

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