Disallowance under section 14A: Whether such disallowance can exceed the amount of exempt income
Issue Outcome: Partial
- The contention of the Assessee before the first appellate authority was that disallowance under section 14A of the Income Tax Act could not exceed the amount of exempt income earned by the Assessee for the relevant assessment year.
- Reliance was placed on the decision in the case of M/s.Century Real Estate Holdings Pvt. Ltd. Vs. Assistant Commissioner of Income Tax, wherein it was held that the disallowance under section 14A of the Income Tax Act could not exceed the exempt income.
- It was observed that the window for disallowance was indicated in Section 14A and was only to the extent of disallowing expenditure incurred by the Assessee in relation to tax exempt income. This proportion or portion of the tax exempt income surely could not swallow the entire amount.
- Therefore, in the light of the said decision, in the present case it was concluded that the disallowance under section 14A of the Act could not exceed the exempt income earned during the relevant assessment year by the Assessee.
- Issue Outcome: In favour of Assessee
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