Advertisement
Advertisement
Skip to content
Follow Us on
Advertisement
TOP STORIES
Income Tax

Disallowance u/s. 14A read with rule 8D cannot exceed exempt income

Case Law Details

TaxGuru Citation
2026 taxguru.in 2017
Case Name
DCIT Vs Sahyadri Agencies Limited (ITAT Mumbai)
Date of Judgement/Order
Only available for paid members
Related Assessment Year
2018-19
Advertisement

DCIT Vs Sahyadri Agencies Limited (ITAT Mumbai)

ITAT Mumbai held that the disallowance under section 14A of the Income Tax Act read with rule 8D cannot exceed the exempt income earned by the assessee during the relevant previous year. Accordingly, no further disallowance u/s. 14A is called for.

Facts- Post scrutiny assessment, AO passed the assessment order dated 01.09.2021 by disallowing the deduction claimed by the assessee under section 36(1)(iii) of the Act in respect of interest of Rs.18,05,18,055/- on borrowed funds. Also, a further disallowance of Rs.54,28,892/- was made u/s.14A of the Act over and above the suo-moto disallowance made by the assessee.

CIT(A) allowed the appeal of the assessee. Being aggrieved, revenue has preferred the present appeal.

Conclusion- Hon’ble Supreme Court in case of Hero Cycles (P) Ltd. v. CIT categorically held that, onus lies on the assessee to demonstrate clear nexus between the borrowed funds and the business purpose, and that where such nexus is not established, or where borrowed funds are diverted for non-business purposes, the interest attributable thereto is not allowable.

Held that the burden of establishing eligibility of deduction under section 36(1)(iii) is cast on the assessee, and no presumption shall be drawn merely on the basis of the nature of the original borrowing.

Paid content

Become a Premium Member, or log in if you are already a Premium member.

Advertisement

Join TaxGuru's Network for the latest updates on Income Tax, GST, Company Law, Corporate Laws and other related subjects.