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S. 14A & Daga Capital cannot put assessee in worse position
The assessee earned dividend income of Rs. 7.57 lakhs but the AO disallowed Rs. 20.73 lakhs u/s 14A as being relatable to the said income. The CIT (A) gave part relief. In deciding cross appeals, HELD
As the assessee had earned tax-free dividend income, s.14A was applicable. The question of determination of the disallowable amount has to be worked out by the AO as per Rule 8D as held the Special Bench judgement in ITO Vs. Daga Capital Management Pvt. Ltd. (2008) 119 TTJ (Mum) (SB) 289. However, the disallowance u/s 14A in the fresh proceedings cannot exceed the original amount disallowed by the AO in the assessment order.
See Also: ACIT vs. Indexport Ltd (ITAT Mumbai) where the same view has been taken after considering Assam Travels 199 ITR 1 (SC).
See Also: New Rule 8D – A lesson in tight rope walking? by CA Anant N. Pai
Related Judgements
- DCIT vs. ING Investment (ITAT Mumbai)
For purposes of s. 14A, only the expenditure which is proved to have a nexus with the exempt income can be disallowed and not on an ad-hoc basis.
- Inderlok Hotels vs. ITO (ITAT Mumbai)
Though s. 50C has been introduced by the Legislature to check the modus operandi of understating the sale consideration in the activity of civil construction and provides that the value determined or assessed by the stamp duty authorities shall be deemed to be the “full value of consideration”, its…
- ITO vs. Daga Capital (ITAT Mumbai – Special Bench) (1.7MB)
The words “in relation to” in s. 14A encompass not only the direct expense but also the indirect expense which has any relation to the exempt income. The argument that the words contemplate a “direct and immediate connection” between the expenditure and the exempt income cannot be accepted. Accordingly,…
