Case Law Details
DCIT Vs PTC India Financial Services Ltd. (ITAT Delhi)
ITAT Delhi held that disallowance under section 14A of the Income Tax Act cannot exceed the exempt income.
Facts- The assessee is a Non-Banking Financial Company. AO made disallowances under section 14A of the Income Tax Act. CIT(A) deleted the partly addition made on account of disallowance u/s. 14A of the Income Tax Act. Being aggrieved, both revenue and assessee has preferred the present appeal.
Conclusion- Held that AO has mechanically applied the formula given in Rule 8D, hence he found that AO has computed the disallowance which is far in excess of the exempt income disclosed by the assessee. In this regard, he referred to Hon’ble Delhi High Court decision in the case of Joint Investment (P) Ltd. vs. CIT and held that disallowance u/s 14A cannot exceed the exempt income. Hence, he directed that assessee has dividend income of RS.57,66,026/- whereas AO disallowed an amount of Rs.17,35,02,922/- which is not logically or prudently possible.
Therefore, following the aforesaid decision of Hon’ble Delhi High Court, ld. CIT (A) directed the AO to limit the disallowance to RS.57.66 lakhs.
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