Revenue Cannot compel Assessee to Spread Fees for NCDs; Section 14A disallowance Limited to Exempt Income

PCIT Vs TATA Industries Ltd. (Bombay High Court) Summary: The Bombay High Court dismissed the appeal filed by the revenue against the order of the Income Tax Appellate Tribunal (ITAT) for the assessment year 2004–05. The revenue raised three substantial questions of law, primarily focusing on disallowance under Section 14A of the Income Tax Act and treatment of debenture issue expenses. The Court observed that disallowance under Section 14A cannot exceed the exempt income earned, a position supported by multiple decisions from coordinate benches, including Nirved Traders Pvt. Ltd. Vs. DCIT ...