The Tax Publishers2019 TaxPub(DT) 7111 (Del-Trib)

INCOME TAX ACT, 1961

Section 14A Rule 8D

Disallowance under section 14A cannot be more than the exempt income earned by assessee. Therefore, the disallowance made by AO under section 14A being more than the exempt income earned by the assessee, would not be sustainable.

Disallowance under section 14A - Expenditure against exempt income - Exempt income being lower than disallowance made by AO -

AO by invoking rule 8D computed disallowance under section 14A, which was more than the exempt income earned by assessee during relevant year under consideration. Held: The window for disallowance is indicated in section 14A, and is only to the extent of disallowing expenditure 'incurred by the assessee in relation to the tax exempt income'. Therefore, the disallowance under section 14A cannot be more than the exempt income earned by assessee. Hence, the disallowance made by AO under section 14A being more than the exempt income earned by the assessee, would not be sustainable.

REFERRED : Joint Investment Ltd. v. CIT (2015) 372 ITR 694 (Del): 2015 TaxPub(DT) 1375 (Del-HC)

FAVOUR : In assessee's favour

A.Y. : 2009-10 & 2010-11


INCOME TAX ACT, 1961

Section 37(1)

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