TaxTMI 
TaxTMI 
2025 (2) TMI 1499
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....see appeal: "1. Disallowance under section 14A of the Income-tax Act, 1961 ('the Act') of INR 2,73,37,449 in absence of proper satisfaction recorded 2. Disallowance under section 14A of the Act read with Rule 8D of the Income-tax Rules, 1962 ('the Rules') be restricted upto exempt income of INR 12,89,293 3. Disallowance under section 14A of the Act read with Rule 8D of the Rules on all investments" Grounds in revenue appeal: "1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that the disallowance u/s 14A has to be made considering only those investments which yielded exempt income? 2. Whether on the facts and circumstances of the ....
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....ar under consideration assessee filed its return of income on 30/10/2017, declaring loss of Rs. 16,15,280/- under normal provisions of the act. The case was selected for scrutiny and notices under section 143(2) along with notice under section 142(1) was issued to the assessee calling upon various details in respect of the exempt income earned by the assessee. In response to statutory notices, the assessee furnished various details. 2.2 The Ld.AO, observed that, the assessee earned dividend income of Rs. 12,89,293/- and claimed exempt under section 10(34) of the Act. The Ld.AO noted that, the assessee suo moto made disallowance under section 14A amounting to Rs. 34,96,299/- under Rule 8D(2) of Income Tax Rules, 1962. The Ld.AO after cons....
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....ng officer did not record satisfaction before rejecting suo moto disallowance computed by the assessee. The Ld.AR submitted that assessee had suo moto disallowed Rs. 34,96,299/- against the exempt income amounting to Rs. 12,89,293/-. The Ld.AR reiterated identical submission made before the Ld.CIT(A) in order to support his argument. 4.2 On the contrary, the Ld.DR relied on the orders passed by the authorities below. It was submitted that even if there is no exempt income, disallowances is required to be made. He further supported the orders based on the amendment made in Section 14A by Finance Act 2022. We have produced the submissions advanced by both sides in the light of the records placed before us. 5. It is noted that the Ld.....
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....and the same results to be dismissed. 6. Coming to the plea of assessee in the cross appeal regarding quantification of the disallowance, Hon'ble Bombay High Court in the case of M/s. Nirved Traders Pvt. Ltd. Vs. DCIT in IT Appeal No. 149 of 2017, dated 23-4-2019 framed following question of law, which reads as under: - "Whether ITAT was right in law in confirming the disallowance under Section 14A of the Income Tax Act, 1961 in excess of exempt income earned by the Assessee during the assessment year in question?" 6.1 The Hon'ble Court while answering the above question took note of the decisions of Hon'ble Delhi High Court in case of Cheminvest Ltd. v. CIT reported in (2015) 61 taxmann.com 118 and Hon'ble Karnat....
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....ity has to make an estimate of such an expenditure incurred to earn exempted income, it has to have a rational nexus with the amount of income earned itself. Disallowance under Section 14A of Rs. 2,48,85,000/- as expenses to earn exempted Dividend income of Rs. 1,80,30,965/- is per se absurd and 1 [2015] 61 taxmann.com 118/234 Taxman 761/378 ITR 33 (Delhi) 2 [2018] [2018] 95 taxmann.com 41/256 Taxman 349 (Karnataka) (Karnatama) URS 3 of 7 4 3-ITXA 149-17.odt hypothetical. The disallowance under Section 8D cannot exceed the expenses claimed by assessee under the Proviso to Rule 8D. Therefore, where the assessee claimed that assessee did not incur any such expenditure during the year in question to earn Dividends of Rs. 1,80,30,965/-, the bur....