Section 14A disallowance fails where dividend remains only proposed and no exempt income is actually received.

Section 14A disallowance requires actual exempt income; where the amount characterised as dividend was only a proposed dividend and was not in fact received as exempt income, the statutory precondition for disallowance was absent. The appellate authorities recorded concurrent factual findings to that effect, and no substantial question of law arose from those findings. On those facts, the disallowance was not sustainable, and the Revenue's challenge failed.

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Issues: Whether disallowance under section 14A of the Income-tax Act, 1961 could be made where the amount treated as exempt income was only a proposed dividend and no exempt income had in fact been received.

Analysis: The assessee had filed its return for the assessment year and later revised it. The Assessing Officer made a disallowance under section 14A on the footing that dividend income of Rs. 142.5 crores was exempt. The appellate authorities found, as a matter of fact, that the amount was not actually received as exempt income and that it remained only a proposed dividend. In such circumstances, the precondition for invoking section 14A was absent, and no substantial question of law arose from the concurrent findings.

Conclusion: Disallowance under section 14A was not sustainable on the facts found, and the Revenue's appeal failed.

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