No disallowance under rule 8D(2)(ii) RW section 14A if interest free funds exceeds investment

Nashik Road Deolali Vyapari Sahakari Bank Ltd. Vs ACIT (ITAT Pune) The assessee earned exempt income of Rs.13,71,442/- from investments in mutual funds. According to AO, the assessee has incurred interest expenditure and claimed no expenditure attributable to exempt income. The AO proceeded to compute the disallowance under Rule 8D(2) and accordingly made disallowance to an extent of Rs.20,15,540/- particularly under Rule 8D(2)(ii) and Rule 8D(2)(iii) of the Rules. The CIT(A) restricted the disallowance to the extent of exempt income. The contention of ld. AR is that the assessee has reserve e...