Case Law Details
PCIT Vs Devata Tradelink Ltd (Delhi High Court)
Introduction: Exploring the complex intersection of tax regulations and share transactions, this article delves into the case of PCIT Vs Devata Tradelink Ltd (AY 2008-09). The focus is on the treatment of interest on loans for share purchase, especially when income from shares is categorized as business income.
Background: The case revolves around the assessment year 2008-09 and challenges the order by the Income Tax Appellate Tribunal. The Assessing Officer (AO) added Rs.5,06,73,874 under Section 14A of the Income Tax Act, invoking Rule 8D.
Disputed Addition: The Commissioner of Income Tax (Appeals) upheld the AO’s addition, despite the respondent/assessee’s suo motu disallowance of Rs.87,442 against an exempt income of Rs.35,347. The AO’s rationale was based on a literal application of Rule 8D, neglecting the proportionality principle.
Legal Precedent: The article references legal precedents, emphasizing that disallowance under Section 14A should not exceed exempt income. Citing Joint Investments Pvt Ltd v. CIT, it argues against interpretations leading to disallowance surpassing tax-exempt income.
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