AO's Application of Rule 8D Valid for Exempt Dividend Income: ITAT Upholds ₹15 Lakh Disallowance

The Income Tax Appellate Tribunal (ITAT) has upheld a ₹15 lakh disallowance, affirming the Assessing Officer's (AO) application of Rule 8D for exempt dividend income. Rule 8D specifies methods for disallowing expenses incurred to earn exempt income. This ruling confirms that even if certain income is exempt from tax (like dividends), expenses related to earning that income cannot be fully claimed as deductions, especially if the AO applies Rule 8D to determine the proportional disallowance. This decision reinforces the tax principle that only expenses incurred for taxable income are fully deductible, ensuring fair taxation practices.