Disallowance u/s 14A is limited to Rs.2,77,80,538/- and cannot ...

Tax dispute over interest expenditure disallowance for exempt income.

November 30, 2024

Case Laws     Income Tax     HC

Disallowance u/s 14A is limited to Rs.2,77,80,538/- and cannot be treated as an enhancement of assessment. Neither assessee nor AO mentioned a specific figure linked to the allowance of interest paid. When the allowance of interest has not reached finality, the quantum of disallowance u/s 14A cannot be considered final. The first appellate authority omitted to consider the disallowable amount u/s 14A, which the Commissioner rectified u/s 154, permissibly. The Supreme Court judgments in South Indian Bank Limited and Maxopp Investment Ltd. clarified that Section 14A aims to prevent double benefit by disallowing expenditure related to exempt income. The Supreme Court in T.S.Balaram and MEPCO Industries Limited held that a mistake apparent on record must be obvious, not requiring a long-drawn reasoning process. The assessee's contention that Section 14A is inapplicable is untenable, as the assessee accepted the disallowance and provided calculations. The appellate authority followed due procedure, issued notice, considered objections, and rectified the error within the Act's purview. Substantial questions of law are answered against the assessee.

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