INCOME TAX ACT, 1961

Section 14A read with Rule 8D of Income Tax Rules, 1962

Disallowance under section 14A - Expenditure against exempt income - Whether disallowance could exceed exempt income earned by assessee during the year -

Assessee-company was engaged in business of investments in shares and securities. AO noticed that the assessee showed dividend income from investments in equity shares, which was claimed as exempt. Accordingly, he made disallowance under section 14A read with rule 8D. CIT (A) restricted the disallowance to the exempt income earned by the assessee. Aggrieved, Revenue was in appeal before Tribunal. Held: In view of decision of jurisdictional High Court in the case of M/s. Nirved Traders (P) Ltd. v. Dy. CIT 2020 TaxPub(DT) 1188 (Bom-HC), disallowance under section 14A read with rule 8D cannot be more than exempt income earned by assessee during the year. Hence, CIT(A) was justified in restricting the disallowance under section 14A read with rule 8D to the quantum of the exempt income earned by the assessee.

Followed:M/s. Nirved Traders (P) Ltd. v. Dy. CIT [ITA No. 149 of 2017, vide Judgment dated 23-4-2019] : 2020 TaxPub(DT) 1188 (Bom-HC)

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2013-14

IN THE ITAT, MUMBAI BENCH

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