Section 14A Disallowance cannot exceed Exempted Income: ITAT Bangalore

Ambika Ghorpade Vs ACIT (ITAT Bangalore)

The case of Ambika Ghorpade vs. ACIT, heard at the ITAT Bangalore, revolves around the disallowance under section 14A of the Income Tax Act, 1961. Additionally, it addresses disallowance of certain expenses incurred by the assessee under section 37(1) of the Act.

Analysis

• Section 14A Disallowance: The assessee contends that the disallowance under section 14A, calculated using Rule 8D, exceeds the actual exempt income earned, which is limited to Rs. 31,600/- through dividends. Citing the decision of the Hon’ble Karnataka High Court in Biocon Ltd. vs. DCIT, the ITAT Bangalore upholds that the disallowance under section 14A cannot surpass the amount of exempt income. Consequently, the disallowance is limited to the exempt income earned by the assessee.

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