INCOME TAX ACT, 1961

Section 14A Rule 8D

Disallowance under section 14A - Expenditure against exempt income - Disallowance in excess of exempt income earned by assessee during the year -

Assessee-company earned exempt income during the year. AO invoked rule 8D and made disallowance under section 14A in excess of the exempt income earned by the assessee. On appeal, Tribunal upheld the said disallowance holding that the disallowance under section 14A could exceed the exempt income. Held: Disallowance under section 14A can never exceed exempt income earned by assessee during the particular assessment year and further, without recording satisfaction by AO that apportionment of disallowable expenditure made by the assessee with respect to exempt income was not acceptable for reasons to be assigned by the AO, he could not resort to computation method under rule 8D. Hence, the disallowance made under section 14A read with rule 8D was accordingly deleted.

Followed:Marg Limited v. CIT (2020) 120 Taxmann.com 84 (Mad) : 2020 TaxPub(DT) 4041 (Mad-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2010-11

SUBSCRIBE FOR FULL CONTENT