Dani Shares & Stock Private Limited Vs DCIT (ITAT Mumbai)
The Mumbai ITAT held that disallowance under Section 14A read with Rule 8D cannot exceed the amount of exempt income earned during the year.
In this case, the Assessing Officer made a disallowance of ₹48.86 lakh under Section 14A, which was affirmed by the CIT(A). The assessee contended that such disallowance should be restricted to the extent of exempt income.
The Tribunal accepted the contention and relied on the jurisdictional High Court ruling, which clearly lays down that Section 14A disallowance is capped at exempt income.
Accordingly, the ITAT directed the AO to restrict the disallowance to the amount of exempt income earned and delete the excess addition, granting relief to the assessee.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal has been preferred by the Assessee against the order dated 17.10.2025, impugned herein, passed by the Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2015-16.
2. In this case, the AO vide assessment order dated 12.12.2017 under section 143(3) of the Act has made the disallowance of Rs.48,86,476/- under section 14A of the Act, read with Rule 8D of the Income Tax Rules, 1962 (in short “the Rules”), which on appeal affirmed by the Ld. Commissioner vide impugned order under consideration. The Assessee is only aggrieved and/or has raised the issue that the disallowance under section 14A, if any, to be sustained, then the same cannot exceed the exempt income earned.
