INCOME TAX ACT, 1961

Section 14A

Disallowance under section 14A - Investment made by assessee - Disallowance under section 14A restricted by CIT(A) to the extent of dividend income claimed as exempt -

Assessee was into the business of providing consultancy relating to investment, acquiring, holding procuring, purchasing all types of securities. AO, by invoking the provisions contained under section 14A read with rule 8D of the Income-tax Rules, 1962 proceeded to make disallowance on the ground that throughout the year, assessee had own funds under the share capital and reserve & surplus whereas investment made were on higher side leading to the conclusion that remaining investment was made from the borrowed funds bearing interest cost. Held: No illegality or perversity in the findings returned by CIT(A) as it was settled principle of law that disallowance under section 14A cannot exceed the exempt income earned by the assessee. High Court in the case of Joint Investment (P) Ltd. v. CIT 2015/372 ITR 694 (Del.) has held that disallowance under section 14A could not exceed the exempt income. Consequently, the appeal filed by the Revenue was dismissed.

Followed:Joint Investments Pvt. Ltd. v. CIT (2015) 372 ITR 694 (Del.) : 2015 TaxPub(DT) 1375 (Del-HC) Ganga Kaveri Credit & Holding Pvt. Ltd. v. ACIT [ITA No. 919/Del/2014, dt. 8-10-2015]

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2013-14

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