Aishwarya Rai Bachchan Gets Relief From ITAT Mumbai; ₹4.6 Crore Disallowance U/S 14A Income Tax Act Deleted As 'Unreasonable'

Section 14A of the Income Tax Act, 1961 has prescribed a method for determining the expenditure incurred towards earning exempt income under Rule 8D by the income tax officer.

The case was heard by bench comprising of Pawan Singh (Judicial Member) and Renu Jauhri (Accountant Member) regarding the disallowance of expenses relating to exempt income under Section 14A r/w Rule 8D of the Income Tax Act.

The dispute arose when Aishwarya Rai Bachchan, the assessee, filed her return of income for A.Y. 2022-23 declaring a total income of Rs. 39 crores.

She had voluntarily (suo-moto) 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.

A show cause notice was issued to her by the Income Tax Department, to which a detailed reply was submitted.

However, the Assessing Officer (AO), proposed to make a disallowance of expenses relating to exempt income under Section 14A r/w Rule 8D of the Income Tax Act.

Aishwarya Rai filed an appeal before the CIT (Commissioner of Income Tax (Appeals), which was allowed, leading to the revenue to file an appeal before the Tribunal.

The department argued that the Assessing Officer as correctly applied the provisions of section 14A read with Rule 8D to compute the disallowance of expenses incurred on earning the exempt income.

The assessee argued that the total expenditure incurred by the assessee is only Rs. 2.48 crores as against which the disallowance of Rs. 4.60 crores have been computed by the Assessing Officer which is unreasonable.

The Tribunal observed that the Assessing Officer has not given clear reasoning as to why the computation of the assessee was incorrect.

The bench noted that Assessing Officer has mechanically rejected the computation submitted by the assessee 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.

The total expenses debited to the P&L account are only Rs. 2,48,11,639/- and thus the computation of disallowance of Rs. 4,60,63,38,863/- is devoid of any logic and clearly unreasonable, stated the bench.

The bench concluded that the disallowance made by the Assessing Officer, over and above the voluntarily (suo-moto) disallowance made by the Aishwarya Rai is without any basis and deserves to be deleted.

In view of the above, the Tribunal dismissed the revenue's appeal, thereby granting relief to Aishwarya Rai Bachchan.

Case Title: ACIT v. Aishwarya Rai Bachchan

Case Number: ITA No.5403/MUM/2025 (A.Y.2022-23)

Counsel for Appellant/ Department: Mani Jain

Counsel for Respondent/ Assessee: Surendra Mohan