ITAT Mumbai deletes ₹4.6 crore disallowance u/s 14A Income Tax Act against Aishwarya Rai as ‘unreasonable’
ITAT Mumbai deletes ₹4.6 crore disallowance u/s 14A Income Tax Act against Aishwarya Rai as ‘unreasonable’
The total income incurred by the assessee is only Rs 2.48 crores as against which the disallowance of Rs. 4.60 crores has been computed by the AO which is unreasonable, the assessee argued.
The Income Tax Appellate Tribunal’s (ITAT’s) Mumbai bench has deleted Rs. 4.6 Crore disallowance made under Section 14A of the Income Tax Act against Aishwarya Rai Bachchan in a high-profile income tax case.
Section 14A of the Income Tax Act, 1961 prescribes a method for determining the expenditure incurred towards earning exempt income under Rule 8D by the income tax officer.
A bench comprising Pawan Singh (judicial member) and Renu Jauhri (accountant member) heard the case regarding the disallowance of expenses relating to exempt income under Section 14A r/w Rule 8D of the Income Tax Act.
The assessee, Aishwarya Rai Bachchan, had filed her return of income for A.Y. 2022-23 declaring a total income of Rs. 39 crores when the dispute arose. Voluntarily (suo-moto), she had made a disallowance of Rs. 49 lakhs under Section 14A in respect of total exempt income of Rs. 2.14 crore at the time of filing her return of income.
The Income Tax Department issued her a show cause notice to which she submitted a detailed reply.
The Assessing Officer (AO) however proposed to make a disallowance of expenses relating to exempt income under Section 14A r/w Rule 8D of the Income Tax Act.
An appeal was filed by Aishwarya Rai before the CIT (Commissioner of Income Tax (Appeals), which was allowed, leading to the revenue to file an appeal before the Tribunal.
The Assessing Officer has correctly applied the provisions of section 14A read with Rule 8D to compute the disallowance of expenses incurred on earning the exempt income; the department argued.
The total income incurred by the assessee is only Rs 2.48 crores as against which the disallowance of Rs. 4.60 crores has been computed by the AO which is unreasonable, the assessee argued.
The AO has not given clear reasoning as to why the computation of the assessee was incorrect, the Tribunal observed.
The AO has mechanically rejected the computation submitted by the assessee, the bench noted and proceeded to compute the disallowance under Section 14A read with Rule 8D at Rs. 4.60 crore without segregating the investments from which exempt income was derived.
A total expenses of Rs. 2,48,11,639/- are debited to the P&L account and thus computation of disallowance of Rs. 4,60,63,38,863/- is without any logic and clearly unreasonable, the bench stated.
The disallowance made by the AO, over and above the voluntarily (suo moto) disallowance made by Aishwarya Rai is sans any basis and deserves to be deleted, the bench concluded.
In view of the above, the Tribunal dismissed the revenue's appeal, thereby granting relief to Aishwarya Rai Bachchan.
Mani Jain appeared as counsel for the appellant/department whereas Surendra Mohan appeared as counsel for the assessee/respondent Aishwarya Rai Bachchan.
