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2020 (9) TMI 666 - AT - Income TaxDisallowance u/s 14A - net interest expenditure - AR submitted that disallowance u/s 14A is attracted only when assessee incurs any expenditure for earning the income which is not forming part of total income - HELD THAT:- In this AY, there is net interest income but it may not be the same situation in all the AYs. The transaction with the Head Office and Branch, which is dealing with themselves has to considered like Mutual Concerns and all the transaction with them should be eliminated for taxation purpose, not just the income but also the expenditure. When the whole transaction is eliminated with the Head Office, it is important to note that it is the main business of the assessee i.e., Banking, all the relevant expenditure for carrying out these transaction also to be eliminated. We do not agree with the assessee that only exempt income which is not part of total income alone should be considered to disallowance u/s 14A. As per the provision of section14A at that point of time, it clearly says that no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act. Nowhere it says it is confine to exempt income which is not form part of total income. Therefore, we are also incline to remit this issue back to AO to quantify the disallowance u/s 14A by eliminating the expenditure relevant for earning the above said income, it may not the interest expenditure alone, it will include the administrative and other expenditure. We urge the AO that the disallowance cannot be more than the income earned by the assessee as it is judicial precedent that the disallowance cannot be more than the income earned by the assessee. Accordingly the ground raised by the assessee is remitted back to AO to quantify the disallowance u/s 14A based on the above direction.
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