Section 14A & Rule 8D Disallowance Not Automatic

AO shall determine the amount disallowable as per Rule 8D, if he, “is not satisfied with the correctness of the claim of the assessee” in respect of such expenditure in relation to exempt income. Even if the assessee claims that no expenditure was incurred in respect of exempt income, the AO is supposed to follow the mandate of Rule 8D if he is not satisfied with the correctness of the assessee’ s claim. To put it simply, the further disallowance u/s. 14A is called for when the AO is not satisfied with the assessee’s claim of having incurred no expenditure or some amount of expenditure...