Tata Industries Ltd Vs ACIT (ITAT Mumbai)
ITAT Mumbai held that disallowance under section 14A of the Income Tax Act cannot exceed the amount of exempt income earned by the assessee during the year under consideration. Accordingly, the matter is restored back to file of AO for exercising the computation of disallowance u/s 14A.
Facts- AO disallowed an amount of Rs. 57.37 crores by invoking provisions of section 14A r.w. rule 8D(2)(i), (ii) & (iii). The aggregate disallowance of Rs. 57.37 crores is reduced by Rs.29.92 crores, which was suo-moto disallowed by the assessee itself in its Return of income. Therefore, the additional disallowance of Rs. 27.45 crores was made. CIT(A) has allowed only the partial relief to the assessee, the assessee in appeal before us, to assail the addition sustained by the Ld. CIT(A).
AO has made an addition of Rs. 28.38 crores u/s 37 of the Act, which is an amount of interest expense and other expenses of HO, claimed by the assessee for Rs.85.75 crores, the amount is reduced by Rs.57.37 crores which has already been disallowed u/s 14A of the Act by AO. CIT(A) on this issue has not allowed any relief to the assessee and have confirmed the findings of Ld. AO by stating that the ‘the appellant’s main activity is to acquire controlling interest in the company in which It makes investment and the same cannot be treated to be a business activity, and hence, interest and other expenses are not allowable.
