Rule 8D Of IT Rules Can Be Invoked Only If Assessee's Computation Of Expenses Attributable To Earning Exempt Income Is Found Inadequate: Delhi HC

The Delhi High Court ruled that Rule 8D of the Income Tax Rules can only be invoked if the taxpayer’s calculation of expenses related to exempt income is deemed inadequate. The Court clarified that the provision cannot be automatically applied without assessing whether the taxpayer’s calculation is correct and in line with the law. This ruling ensures that taxpayers are not subjected to arbitrary assessments and that the application of Rule 8D is limited to cases where there is a genuine inadequacy in the expense allocation.