ITAT partially allows assessee's appeal on disallowance under section 14A of Income Tax Act for AYs 2013-14 & 2014-15

The ITAT partially allowed the assessee's appeals regarding disallowance under section 14A of the Income Tax Act for AYs 2013-14 and 2014-15. The ITAT directed the AO to restrict the disallowance to the exempt income earned during the years, resulting in disallowances of Rs. 4,99,674 for AY 2013-14 and Rs. 4,28,292 for AY 2014-15. The judgment was pronounced on 7th May 2021.

---

---

Issues:
- Disallowance u/s 14A of the Income Tax Act, 1961 for AYs 2013-14 & 2014-15.

Analysis:
The appeals were filed by the assessee against the CIT(A)'s separate orders concerning disallowance u/s 14A of the Income Tax Act, 1961. The assessee, engaged in real estate and hospitality businesses, initially declared a taxable income for AY 2013-14 at Rs. 1,05,55,890/-, later revised to Rs. 1,13,86,340/-. The Assessing Officer, after scrutiny, made additions towards disallowance u/s 37(1) and u/s 14A, resulting in a total assessed income of Rs. 1,24,21,017/-. The CIT(A) directed the AO to limit the disallowance u/s 14A to the dividend amount received, i.e., Rs. 8,39,619/-. Unsatisfied, the assessee appealed to the ITAT.

Upon review, the ITAT considered the arguments and precedents, emphasizing that the disallowance u/s 14A with Rule 8D should not surpass the exempt income earned during the year. Citing case laws like Cheminvest Ltd., Chettinad Logistics Private Limited, and CIT vs. Corrteck Engineering Pvt. Ltd., the ITAT noted the assessee's exempt income of Rs. 4,99,674 in AY 2013-14 and Rs. 4,28,292 in AY 2014-15. Consequently, the ITAT directed the AO to restrict the disallowance u/s 14A as per Rule 8D to Rs. 4,99,674/- for AY 2013-14 and Rs. 4,28,292 for AY 2014-15.

In conclusion, both appeals by the assessee were partially allowed by the ITAT, limiting the disallowance u/s 14A in accordance with the exempt income earned for the respective assessment years. The judgment was pronounced on 7th May 2021.

---