The Mumbai Income Tax Appellate Tribunal (ITAT) came to the aid of Aishwarya Rai Bachchan (appellant-taxpayer) and granted relief from investment expenditure disallowances of Rs. 4.11 Crores under Section 14A of the Income Tax Act, read with Rule 8D, which was made without segregating the investments from which exempt income was derived by the appellant.
The Tribunal held that the AO cannot simply reject the computation submitted by the actress-taxpayer as per Section 14A read with Rule 8D after considering only those investments from which exempt income was earned during the year, without assigning any reason.
The Division Bench comprising Pawan Singh (Judicial Member) and Renu Jauhri (Accountant Member) observed that the AO had to record his satisfaction as to why the suo-moto disallowance made by the appellant was not acceptable. Reference was made to the decision of the Apex Court in the case of Maxopp Investments Ltd. vs. CIT [(2018) 402 ITR 640].
The Bench also noted that when the total expenses debited to the Profit & Loss account are only Rs. 2.48 crores, the computation of disallowance of Rs. 4.60 Crores was devoid of any logic and clearly unreasonable. Accordingly, the Bench dismissed the appeal in favour of the actress and deleted the disallowance made by the AO over and above the suo-moto disallowance made by the actress herself.
Briefly, in this case, pursuant to the appellant-actress filing her ITR declaring an income of Rs. 39.33 Crores, the AO proposed to make a disallowance of expenses relating to exempt income under Section 14A read with Rule 8D. Even though the appellant submitted that the suo-moto disallowance of Rs. 49.08 lacs has already been made, despite no expenditure being incurred for earning the exempt income, the AO disallowed the balance amount of Rs. 4.11 Crores under Section 14A and completed the assessment at an income of Rs. 43.44 crores.
Case Relied On:
Maxopp Investments Ltd. vs. CIT [(2018) 402 ITR 640]
Appearances:
Mani Jain, for the Appellant/ Revenue
Surendra Mohan, for the Respondent/ Taxpayer
