INCOME TAX ACT, 1961

Section 14A

Disallowance under section 14A - Expenditure incurred against earning of exempt income - No exempt income earned by assessee -

AO noticed that assessee had made investment and had not made any disallowance under section 14A read with rule 8D of the Income Tax Rules in respect of any expenditure incurred for the aforesaid investment. The case of the assessee before AO was that interest free funds were used for investing in equity shares and in such circumstances, no disallowance was required to be made under section 14A read with rule 8D of the Income Tax Rules. Assessee also declared that no exempt income had been claimed and therefore, the disallowance under section 14A should not be made. Held: Supreme Court in the case of Maxopp Investment Ltd [2018 TaxPub(DT) 1403 (SC)] had held that as assessee had not made any claim for exemption of any income from payment of tax, the disallowance under section 14A cannot be made. To attract the provisions of section 14A, it is necessary that assessee should have earned any exempt income. Since assessee-company had not earned any exempt income and had not claimed any such exempt income in his return of income, therefore, disallowance under section 14A could not be made.

Followed:Maxopp Investment Ltd. v. CIT 2018 TaxPub(DT) 1403 (SC) DCIT v. Winsome Diamonds [I.T.A. No.3982/Mum/2018, dt. 20-8-2019]

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2014-15

SUBSCRIBE FOR FULL CONTENT