Disallowance u/s 14A can not exceed exempt income – Supreme Court dismisses SLP of the Department against the judgment of Delhi High Court
ABCAUS Case Law Citation:
ABCAUS 2639 (2018) (11) SC
Important Case Laws Cited/relied upon:
Commissioner of Income Tax v. Joint Investment Pvt. Ltd. 372 ITR 694
The Hon’ble Delhi High Court had dismissed the appeal filed by the Principal Commissioner of Income Tax on the issue of section 14A addition.
The respondent assessees had declared a meagre amount of income as exempt. However, the Assessing Officer (AO) added back substantial amounts under Section 14A of the Income Tax Act, 1961 (the Act) on the basis that huge amounts of borrowings had been converted into equity holdings.
The CIT(A) and both the ITAT granted relief to the assessee. The Tribunal followed an earlier decision of the Delhi Court in wherein it was held that the disallowance under Section 14A should not exceed the exempt income itself.
The Department challenged the decision of the ITAT before the Delhi High Court who in view of law settled on this point of law, dismissed the appeal.
Not satisfied, the Revenue approached the Hon’ble Supreme Court by way of filing a Special Leave Petition (SLP).
However, the Hon’ble Supreme Court dismissed the SLP of the Revenue.