INCOME TAX ACT, 1961

Section 14A

Disallowance under section 14A - Expenditure incurred against earning of exempted income - Disallowance shall not exceed exempted income -

Assessee was engaged in business of real estate, i.e., commercial/malls/residential developments and hospitality business of lodging and boarding. The case was selected for scrutiny and accordingly, AO issued notices. In response to the notices, assessee appeared and filed information. After going through the information, AO completed the assessment by making disallowance under section 14A. CIT(A) directed AO to restrict the disallowance under section 14A of dividend amount received. Held: It is a settled position that disallowance of expenditure under section 14A read with rule 8D shall not exceed exempt income earned for the year as per case law in Cheminvest Ltd. v. CIT (2015) 378 ITR 33 (Del.) : 2015 TaxPub(DT) 3520 (Del-HC), Chettinad Logistics Private Limited [2017] (4) TMI 298 Mad, CIT v. Corrteck Engineering Pvt. Ltd. (2014) 372 ITR 97 (Gujrat) : 2014 TaxPub(DT) 2072 (Guj-HC). Assessee earned exempted income in assessment years 2013-14 and 2014-15 as per computation of income. Therefore, AO was directed to restrict disallowance under section 14A read with rule 8D in assessment years 2013-14 and 2014-15.

Followed:CIT v. Chettinad Logistics Pvt. Ltd. 2017 TaxPub(DT) 1144 (Mad-HC), Cheminvest Limited v. CIT (2015) 378 ITR 33 (Del.) : 2015 TaxPub(DT) 3520 (Del-HC) and CIT v. Corrtech Energy Pvt. Ltd. (2014) 372 ITR 97 (Gujrat) : 2014 TaxPub(DT) 2072 (Guj-HC).

REFERRED :

FAVOUR : Partly in assessee's favour.

A.Y. : 2013-14 & 2014-15

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