Disallowance u/s 14A of Income Tax Act not available in respect of Investments not yielding Tax-Free Income: ITAT

The Mumbai Bench of Income Tax Appellate Tribunal ruled that disallowance under section 14A of the Income Tax Act isn't applicable to investments not generating tax-free income. Paranjapee Schemes Construction Ltd had voluntarily disallowed expenses of Rs. 53,79,526 on exempt income. The assessing officer proposed a disallowance of Rs. 4,08,32,574 under section 14A r.w. rule 8D. \r

However, the ITAT upheld the assessee's contention that disallowance can't be made without exempt income and ruled that no disallowance is warranted for investments not yielding tax-free income. The bench affirmed the decision of the CIT(A) and upheld the suo-moto disallowance made by the assessee.