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2020 (2) TMI 1438 - AT - Income TaxAddition u/s 14A - AO was of the view that u/s. 14A expenditure incurred to earn exempt income should be disallowed - HELD THAT:- In the case of Cheminvest Ltd. [2015 (9) TMI 238 - DELHI HIGH COURT] and in light of the admitted factual position that the assessee did not earn any exempt income during the relevant previous year, the disallowance of expenses u/s. 14A was rightly deleted by the CIT(Appeals). High Court of Delhi in the case of Prl. CIT Vs. IL & FS Energy Development Co. Ltd. . 2017 (8) TMI 732 - DELHI HIGH COURT]) has held that CBDT Circular upon which extensive reliance is placed by revenue does not refer to rule 8D(1) at all. but only refers to the word "includible" occurring in the title to rule 8D as well as the title to section 14A. Circular concludes that it is not necessary that exempt income should necessarily be included in a particular year's income for the disallowance to be triggered. The Court held that the process of interpretation adopted by the CBDT will be a truncated reading of section 14A and rule 8D particularly when rule 8D(1) uses the expression 'such previous year'. Further, it does not account for the concept of 'real income'. It does not note that under section 5, the question of taxation of 'notional income' does not arise. For all of the aforementioned reasons, the Court held that the CBDT Circular dated 11.5.2014 cannot override the express provisions of section 14A, read with rule 8D. - Decided against revenue.
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