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2018 (4) TMI 17 - ITAT COCHINAddition u/s 14A - Held that:- The dominant purpose for which the investment in shares is made by an assessee is not relevant in determining the allowability of that expenditure and section 14A of the Act has to be interpreted particularly, the word “in relation to the income” that does not form part of the total income. If the expenditure is incurred in making investment which yield exempt income, that much of expenditure which is attributable to that income is to be disallowed and cannot be treated as business expenditure. If no expenditure is incurred in relation to exempted income, no disallowance can be made under section 14A of the IT Act. It was further observed that only that expenditure which has been incurred in relation to non-taxable income has to be disallowed. If an expenditure incurred has no ‘principal connection” with the exempted income, then such an expenditure would clearly be treated as not “in relation to the income which does not form part of the total income”, and such expenditure would be allowed as business expenditure. In the present case, direct expenditure has been incurred on the investment made in sister concern. Such expenditure has to be disallowed. Hence we do not find any infirmity in the order of the CIT(A) and confirm the same. In the present case, direct expenditure has been incurred on the investment made in sister concern. Such expenditure has to be disallowed. Hence we do not find any infirmity in the order of the CIT(A) and confirm the same. - Decided against revenue
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