KEI Industries Ltd. Vs ACIT (ITAT Delhi)
ITAT Delhi Restricts 14A Disallowance to Exempt Income – No Rule 8D in MAT Computation
Assessee earned dividend income of ₹3,90,326 during AY 2014-15 & claimed exemption u/s 10. In return, it made suo moto disallowance of ₹25,61,188 u/s 14A applying Rule 8D(2). AO accepted this under normal provisions but also added same figure while computing book profits u/s 115JB, invoking clause (f) of Explanation 1. CIT(A) confirmed.
Before Tribunal, Assessee contended that Disallowance u/s 14A cannot exceed exempt income as per Delhi HC ruling in Joint Investments Ltd. Vs. CIT (372 ITR 694). While computing book profits u/s 115JB, Rule 8D cannot be imported as held by Delhi ITAT in Vireet Investments Pvt Ltd (165 ITD 27).
ITAT accepted both contentions. It directed AO to restrict disallowance under normal provisions only to the extent of exempt dividend income of ₹3,90,326. For MAT computation, disallowance u/s 14A was also directed to be capped at same amount & not the higher suo moto disallowance made under Rule 8D.
FULL TEXT OF THE ORDER OF ITAT DELHI
1. The appeal in ITA No.1668/Del/2025 for AY 2014-15, arises out of the order of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. NFAC’, in short] in Appeal No. ITBA/NFAC/S/250/2024-25/1072430406(1) dated 22.01.2025 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 22.12.2016 by the Assessing Officer, ITO, Circle-14(2), Delhi (hereinafter referred to as ‘ld. AO’).
