https://www.taxtmi.com/caselaws?id=346674 The Delhi HC ruled in favor of the assessee regarding Section 14A read with Rule 8D disallowance. The court held that expenditure disallowance under Section 14A applies only when exempt income is actually earned in the relevant assessment year, not merely when potential for such income exists. The HC interpreted Rule 8D(1)'s phrase "in relation to income which does not form part of total income for such previous year" as establishing a direct correlation between exempt income earned and expenditure incurred in the same year. The court rejected the revenue's reliance on CBDT Circular No. 5/2014, stating it provided a truncated reading of the provisions and failed to account for the "real income" concept under Section 5. The HC emphasized that notional income taxation doesn't arise under the Act, and mere audit suggestions cannot determine legal positions when no actual exempt income was earned. en-us Wed, 16 Aug 2017 00:00:00 +0530 Tue, 22 Jul 2025 12:34:00 +0530 TaxTMI RSS Generator https://www.taxtmi.com/caselaws?id=346674 The Delhi HC ruled in favor of the assessee regarding Section 14A read with Rule 8D disallowance. The court held that expenditure disallowance under Section 14A applies only when exempt income is actually earned in the relevant assessment year, not merely when potential for such income exists. The HC interpreted Rule 8D(1)'s phrase "in relation to income which does not form part of total income for such previous year" as establishing a direct correlation between exempt income earned and expenditure incurred in the same year. The court rejected the revenue's reliance on CBDT Circular No. 5/2014, stating it provided a truncated reading of the provisions and failed to account for the "real income" concept under Section 5. The HC emphasized that notional income taxation doesn't arise under the Act, and mere audit suggestions cannot determine legal positions when no actual exempt income was earned. Case-Laws Income Tax Wed, 16 Aug 2017 00:00:00 +0530 https://www.taxtmi.com/caselaws?id=346674