INCOME TAX ACT, 1961

Section 14A Rule 8D

Disallowance under section 14A - Expenditure against exempt income - Disallowance over and above exempt income earned by assessee during the year -

Assessee, a joint venture, was engaged in manufacture of carbon and alloy steels and other engineering applications. It earned dividend income during the year. Though assessee declared total income, no disallowance of expenditure incurred for earning exempt income was made. AO made disallowance under section 14A read with rule 8D(2)(iii). On appeal, CIT(A) held that the assessee failed to demonstrate the availability of interest free funds and directed the AO to rework the disallowance under rule 8D(2)(ii). Aggrieved, assessee was in appeal. It contended that the disallowance under section 14A read with rule 8D should not exceed the exempt income earned. Held: The jurisdictional High Court in the case of Nirved Traders Pvt. Ltd. v. Dy. CIT (2020) 421 ITR 142 (Bom) : 2020 TaxPub(DT) 1188 (Bom-HC), restricted the disallowance under section 14A read with rule 8D to the exempt income earned. In view of the same, the disallowance under section 14A read with rule 8D as made in instant case, was restricted to the extent of exempt income earned by assessee during the year.

Followed:Nirved Traders Pvt. Ltd. v. Dy. CIT (2020) 421 ITR 142 (Bom-HC) : 2020 TaxPub(DT) 1188 (Bom-HC)

REFERRED :

FAVOUR : In assessee's favour/Partly in favour of assessee.

A.Y. : 2014-15

INCOME TAX ACT, 1961

Section 37(1)

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