Appellate Tribunal limits disallowance under section 14A to exempt income

DLF Universal Limited Versus ACIT, Circle-1 (1), Gurgaon And Vice-Versa

DLF Universal Limited Versus ACIT, Circle-1 (1), Gurgaon And Vice-Versa - TMI Issues Involved:
Reduction/sustenance of disallowance u/s 14A of the Income-tax Act, 1961.

Analysis:
The Appellate Tribunal ITAT, Delhi heard two cross-appeals concerning the reduction/sustenance of disallowance u/s 14A of the Income-tax Act, 1961 for the assessment year 2010-11. The assessee declared investments of Rs. 53.51 crore with exempt dividend income of Rs. 4,30,621. The Assessing Officer computed disallowance under Rule 8D at Rs. 3,80,01,842, which the CIT(A) reduced to Rs. 63,48,133. The main issue raised by both parties was the quantum of disallowance under section 14A. The Tribunal considered relevant precedents, including the decisions of the jurisdictional High Court and the Delhi High Court, which established that the disallowance under section 14A cannot exceed the exempt income. Therefore, the Tribunal limited the disallowance to the extent of the exempt income of Rs. 4,30,621. Consequently, the appeal of the Revenue was dismissed, and that of the assessee was partly allowed.

In conclusion, the Tribunal's judgment clarified the principle that the disallowance under section 14A of the Income-tax Act, 1961 should not exceed the amount of exempt income. This decision was based on established precedents from the jurisdictional High Court and the Delhi High Court. The judgment provided a clear guideline for determining the quantum of disallowance under section 14A, ensuring a fair and consistent application of the law in such cases.