The Tax Publishers2021 TaxPub(DT) 6476 (Bang-Trib)

INCOME TAX ACT, 1961

Section 14A

Disallowance under section 14A could not exceed exempt income earned during relevant assessment year. Irrespective whether larger amount was disallowed by assessee under section 14A while filing return of income.

Disallowance under section 14A - Expenditure against exempt income - Disallowance in excess of tax free income - Excess amount disallowed by assessee itself while filing return

Assessee earned tax free dividend income amounting to Rs. 27 lakhs and claimed suo moto disallowance under section 14A amounting to Rs. 145 lakhs. Later on, assessee changed its stand and sought to disallowance under section 14A of to Rs. 27 lakhs. AO denied assessee's claim.Held: Disallowance under section 14A could not exceed exempt income earned during relevant assessment year. Irrespective whether larger amount was disallowed by assessee under section 14A while filing return of income. Therefore, AO was directed to restrict the disallowance under section 14A to Rs. 27 lakhs.

Relied:Marg Limited v. CIT Tax Case Appeal Nos. 41 to 43 & 220 of 2017 [Judgment, dated 30-9-2020] : 2020 TaxPub(DT) 4041 (Mad-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2015-2016


INCOME TAX ACT, 1961

Section 56(2)(viib)

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