Sec.14A & Rule 8D Disallowance Cannot Exceed Total Expenditure

S. 14A Deduction not allowed in respect of expenditure incurred by assessee towards exempt income

As per sub-section (1) of Section 14A, no deduction is to be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of total income. Sub-section (2) of Section 14A provides the procedure for determination of such expenditure by the Assessing Officer. The Board has also prescribed Rule 8D for determining the expenditure incurred by the assessee for earning of exempt income. Thus, the disallowance can be made under sub-section (1) for the expenditure incurred for earning of exempt income.

In the case under appeal before us, from the perusal of the assessee’s profit & loss account, it is evident that the total expenditure incurred was Rs.49,04,028/- only. Thus, the assessee claimed the deduction for the expenditure of Rs.49,04,028/- which is debited to the profit & loss account. The disallowance cannot exceed the expenditure actually claimed by the assessee. We, therefore, accept the assessee’s contention that the disallowance made by the Assessing Officer and sustained by the learned CIT(A) in excess of total expenditure debited to profit & loss account was unjustified. Accordingly, we restrict the disallowance to the extent of expenditure actually claimed by the assessee i.e. Rs.49,04,028/-.

INCOME TAX APPELLATE TRIBUNAL, DELHI

ITA No.267/Del/2012 –  Assessment Year: 2008-09

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