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2017 (5) TMI 579 - AT - Income TaxDisallowance u/s 14A - Held that:- The exemption extended to dividend income would relate only to the previous year when the income was earned and none other and consequently the expenditure incurred in connection therewith should also be dealt with in the same previous year. Thus, by application of the matching concept, in a year where there is no exempt income, there cannot be a disallowance of expenditure in relation to such assumed income. See Redington (India) Ltd vs. ACIT [2017 (1) TMI 318 - MADRAS HIGH COURT] MOU entered into by the assessee with M/s. Sri Sai Ram Projects Ltd is placed on record. On perusal thereof, it is seen that by virtue of the investment in shares, the assessee has acquired interest in the company for getting a right over the property at concessional rates. Therefore, it is more of business investment and not an investment per se for earning of dividend income. It is also submitted by the learned Counsel for the assessee that in the subsequent year, the property acquired under the MOU has been sold and the income therefrom has been offered as business income. However, the relevant documents in support of these contentions are not filed before us. Even otherwise, the assessee has not earned dividend income under the relevant A.Y. The language of s.14A (1) should be read in that context and such that it advances the scheme of the Act rather than distort it. In conclusion, we are of the view that the provisions of s. 14A read with Rule 8D of the Rules cannot be made applicable in a vacuum i.e. in the absence of exempt income. The questions of law are answered in favour of the assessee and against the department
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