LT Foods Ltd, New Delhi vs. Additional CIT - (Income Tax Appellate Tribunal) (03 Jan 2024)

Disallowance under Section 14A of the IT Act cannot exceed exempt income claimed

MANU/ID/0008/2024

Direct Taxation

The present appeal has been filed by the assessee against the order of learned CIT(A). The only issue raised pertains to disallowance of expenses under Section 14A of the Income Tax Act, 1961 (IT Act). During the year, the assessee received total amount of Rs. 66,810 in respect of which exemption was claimed under Section 10 of the Income Tax Act, 1961. The amount consists of Rs. 51,228 on account of share in profit in the partnership firm, an amount of Rs. 15,582 on account of dividend income from mutual fund.

The assessee has suo motu made disallowance of Rs. 8,44,669 under Section 14A read with Rule 8D. The Assessing Officer has increased the disallowance to Rs. 1,35,74,360 which the learned C IT(A) confirmed. Aggrieved, the assessee filed appeal before present Tribunal.

The facts are not in dispute. By this time, it is settled position that the disallowance under Section 14A of the Act cannot exceed exempt income claimed. In the instant case, the exempt income claimed by the assessee was Rs. 66 ,810 and the disallowance already made were to the tune of Rs.8,44,699.

In view of the judgment of High Court in the case of Joint Investment Pvt. Ltd. Vs. CIT, present Tribunal hold that disallowance made by the Assessing Officer cannot be sustained. The appeal of the assessee is allowed.

Tags : ASSESSMENT DISALLOWANCE LEGALITY