Disallowance Under Section 154A capped

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) held that disallowance under Section 14A of the Income-tax Act cannot exceed the amount of exempt income earned during the relevant assessment year. 

While affirming the applicability of Section 14A in principle, the Tribunal restricted the disallowance from ₹7.54 lakh to ₹2.63 lakh, being the actual exempt income earned by the assessee. 

In doing so, the Tribunal followed binding Delhi High Court precedents and reiterated that the Finance Act, 2022 amendment to Section 14A operates prospectively and cannot be applied to earlier assessment years.