PCIT Vs R. J. CORP. Limited (Delhi High Court)
Delhi High Court held that the disallowance under Section 14A of the Income Tax Act is to be restricted to the exempted income. Amendment to section 14A in terms of Finance Act, 2022 is prospective in nature. Accordingly, appeal of revenue dismissed.
Facts- This appeal lays a challenge to an order dated 25.08.2022, whereby the Tribunal while deciding the cross appeals filed by the appellant and the respondent herein challenging the order of CIT (A)-24 dated 08.06.2025 has allowed the appeal of Assessee resulting in the dismissal of appeal filed by the Revenue on the aspect of amendment that had been brought about in terms of Finance Act 2022, which holds that the amendment to Section 14A is prospective in nature.
The proposed substantial questions of law as framed in the present appeal are in respect of Section 14A of the Act. Suffice to state that during the relevant Assessment Year 2011-12, the Assessee has earned Rs.50,000/- on divided income, which has been reflected under the head “other income” in the P&L account. AO disallowed an amount of Rs.14,12,51,908/- u/s. 14A of the Act. The CIT(A) has determined the disallowance @ 0.5% of the average investment. Aggrieved by the same, the Revenue filed appeal before the Tribunal against the deletion of disallowance to the tune of Rs.6,71,96,859/- by the CIT(A) and also by the assessee for upholding disallowance of Rs.89,32,232/-. Tribunal held that the amount of disallowance u/s. 14A of the Act needs to be restricted to the extent of exempted income earned during the relevant AY.
