Bollywood actress Aishwarya Rai has recently received relief from the Income Tax department. The Income Tax Appellate Tribunal (ITAT) Mumbai has ruled in favour of the actress.
The tribunal has removed the Rs 4 crore disallowance raised by the income tax department for the Assessment Year 2022–2023.
According to the Economic Times, the disagreement centred on Section 14A of the Income-tax Act, which prohibits deductions for costs incurred in order to generate exempt income.
The actress reportedly declared a total income of Rs 39.33 crore for the year, which also included Rs 2.14 crore from tax-free investments. In her return, she declared a voluntary disallowance (suo-motu) of Rs 49.08 lakh, claiming that no direct costs were incurred in order to generate the exempt income.
Meanwhile, her assessed income was raised to Rs 43.44 crore after the Assessing Officer (AO) disregarded her calculation and applied Rule 8D, resulting in a disallowance of Rs 4.60 crore.
The Business Today reported that the tax department contended that the AO had appropriately recorded his satisfaction and applied Section 14A in conjunction with Rule 8D.
However, Aishwarya’s representative claimed that the AO failed to accurately document his satisfaction and disregarded her thorough response without giving it careful thought.
Additionally, they noted that the AO’s disallowance was Rs 4.60 crore, which was significantly higher and unfair, whereas her total expenses were only Rs 2.48 crore.
The Commissioner of Income Tax (Appeals) [CIT(A)] granted her relief after she filed an appeal. The issue was then brought before the ITAT by the tax department.
The tribunal concluded that the AO had disallowed the investment without distinguishing which investments actually generated exempt income, merely rejecting her calculation.
The tribunal also pointed out that the disallowance of Rs 4.60 crore was irrational because her total expenses were only Rs 2.48 crore.
The ITAT said, “Accordingly, we are of the considered view, that the disallowance made by the Id. AO over and above the suo-moto disallowance made by the assessee is without any basis and deserves to be deleted. In the result, the appeal of the revenue is dismissed.”
The tribunal also emphasised that the AO had not given sufficient justification or given due consideration to the facts.
ITAT Mumbai referenced the Supreme Court’s decision in Maxopp Investments Ltd. vs. CIT (2018), which states that before applying Rule 8D, the AO must justify the taxpayer’s disallowance.
After the Vireet Investments Pvt. Ltd. ruling, Aishwarya had only included costs for investments that truly generated exempt income. The actress prevailed in the ITAT Mumbai case on October 31, 2025.
Source #TOI
