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2023 (2) TMI 956 - AT - Income TaxDisallowance u/s 14A read with Rule 8D - contention of the assessee that assessee had earned tax free dividend of only Rs. 8.81 lacs whereas the disallowance made by AO u/s. 14A r.w.r. 8D and upheld by the Ld. CIT(A) is to the extent of Rs. 1.78 crores (rounded of) which is much in excess of the exempt income earned - HELD THAT:- As in the case Caraf Builders & Construction Pvt. Ltd. [2018 (12) TMI 410 - DELHI HIGH COURT] has held that disallowance u/s.14A cannot exceed exempt income of the relevant year. In view of the settled position of law that the disallowance u/s. 14A cannot exceed exempt income and in view of the fact that the disallowance made u/s. 14A r.w.r 8D is much in excess of the exempt income, we direct the AO to restrict the disallowance u/s. 14 r.w.r 8D to the extent of exempt income earned by the assessee. Before us, though the assessee has stated that it has earned exempt tax free dividend income of Rs. 8.81 lacs but we find that there is no finding by the lower authorities of the exempt income earned by the assessee. AO is therefore directed to work out the disallowance u/s. 14A r.w.r 8D after considering the submissions of the assessee with respect to the exempt income earned and in accordance with law. Decided in favour of assessee for statistical purposes.
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