Pest Control India Pvt Ltd vs. DCIT (ITAT Mumbai)
By no stretch of imagination can Section 14A or Rule 8D be interpreted so as to mean that entire tax exempt income is to be disallowed
The Hon’ble Delhi High Court in the case of Joint Investment Private Limited in ITA.No. 117/15 dated 25.02.2015 held that by no stretch of imagination can section 14A or Rule 8D be interpreted so as to mean that entire tax exempt income is to be disallowed.
Disallowance under Section 14A or Rule 8D cannot exceed the exempt income
Iit has been held in various cases that the disallowance u/s. 14A r.w. Rule 8D cannot exceed the exempt income. The Hon’ble Punjab and Haryana High Court in the case of Principal Commissioner of Income Tax-I M/s Empire Package Pvt. Ltd in ITA.No. 415 of 2015 dated 12.01.2016, dismissed the appeal of the Revenue holding that there is no substantial question of law arise in the appeal on the following question raised by the Revenue: –
“Whether in the facts and circumstances of the case, the Hon’ble ITAT is justified in law to hold that the disallowance made under section 14A read with Rule 8D cannot exceed the exempt income, in the absence of any such restriction being there in the relevant section or rule?”
The Hon’ble High Court affirmed the order of the ITAT in holding that the disallowance u/s. 14A r.w. Rule 8D as worked out by the Assessing Officer is not in accordance with law for the reason that Assessing Officer has disallowed entire tax exempt income and this is not permissible in view of the judgment of the Hon’ble Delhi High Court.
