9911796707
TMI Blog2011 (12) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... rtually treated as the lead case. On perusal of the order-sheets pertaining to ITA No.1367/2008, it is found that on the very first date when the said appeal was moved i.e., 03.12.2008, it was pointed out to the Revenue that since the impugned judgment of the Tribunal was based on its own decision, rendered on the same issue, for Assessment Year 1994-1995; which was in favour of the assessee - whether the Revenue had preferred an appeal against the said decision. Since then, several adjournments for the past three years have been taken on this ground alone. 3. In the interregnum, it was also pointed out, both by the counsel for revenue as well as the assessee, that an identical issue was pending consideration before a coordinate bench of this court. This aspect is noted in order dated 26.04.2011. The coordinate bench comprising of Hon'ble Mr. Justice Badar Durrez Ahmed and Hon'ble Mr. Justice Siddharth Mridul have delivered a common judgment dated 18.11.2011; in respect of a batch of appeals; the lead appeal being: ITA No.687/2009 titled Maxopp Investment Ltd. Vs. Commissioner of Income Tax, New Delhi. 4. In the background of the aforementioned orders, we were informed as recentl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal has extracted the relevant portion of the opinion rendered by the third member. A perusal of the view expressed by the third member, in sum and substance suggests that he was of the opinion that section 14 A of the IT Act was brought on to the statute with the view to correct the lacuna found in the I.T. Act, which had been noticed in the decisions rendered by the Supreme Court, whereby expenses incurred in relation to an indivisible business comprising of activities which generated both taxable and tax free income, were sought to be bifurcated artificially so as to disallow expenditure, which was, purportedly incurred to earn tax free income. The third member was of the view that the introduction of section 14 A in the IT Act by virtue of Finance Act, 2001; (which was incidentally given effect to retrospectively, i.e., from 01.04.1962) did not confer on the Assessing Officer the authority to deem or assume certain expenditure to have been incurred in relation to tax free income. The relevant observations of the third member as extracted in the impugned judgment read as follows :- "....In my view, the order of the learned JM is to be preferred. On the construction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come and disallow the same. But the section cannot be taken beyond that and every item of expenditure which has no apparent connection or nexus with the earning of the tax free income cannot be in part be attributed on some yardstick, whatever may be the sanctity behind such yardstick, to the earning of the tax free income. For such assumption or deeming, there is no authority given in the section as it stood for the year under appeal...." 8.2 These observations of the Tribunal for the assessment year 1994-1995, are in our opinion, contrary to some of the observations made by a coordinate bench in Maxopp Investment Ltd. (supra). A particular reference in this regard is made to the expression "incurred" and "in relation to" which finds reference in provisions of section 14A as it stood with its insertion in I.T. Act for the first time in 2001; albeit with retrospective effect. Section 14 A as introduced by Finance Act, 2001 read as follows :- "Expenditure incurred in relation to income not includible in total income . 14A. For the purposes of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of sub-section (2) shall also apply in relation to a case where an assessee claims that no expenditure has been incurred by him in relation to income which does not form part of the total income under this Act. Provided that nothing contained in this section shall empower the Assessing Officer either to reassess under section 147 or pass an order enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee under section 154, for any assessment year beginning on or before the 1st day of April, 2001." 8.4 With effect from 24.03.2008, the Central Board of Direct Taxes (in short "CBDT") has also framed a rule as per the mandate of the provision which is numbered as Rule 8D. 9. Given these amendments, the coordinate bench adverted to submissions with regard to the term "incurred" and the expression "in relation to" as obtaining in section 14 A as originally inserted in the IT Act, which as is evident from the above, was converted into sub-section(1). Therefore, the observations of the bench in respect of the said expression attain criticality and cannot be wished away. For the sake of convenience the observations made in par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "pertaining to". If the expenditure in question has a relation or connection with or pertains to exempt income, it cannot be allowed as a deduction even if it otherwise qualifies under the other provisions of the said Act. In Walfort (supra), the Supreme Court made it very clear that the permissible deductions enumerated in sections 15 to 59 are now to be allowed only with reference to income which is brought under one of the heads of income and is chargeable to tax. The Supreme Court further clarified that if an income like dividend income is not part of the total income, the expenditure/deduction related to such income, though of the nature specified in sections 15 to 59, cannot be allowed against other income which is includable in the total income for the purpose of chargeability to tax. "expenditure incurred" 26. It was contended by the learned counsel for the assessees that the words "expenditure incurred" as appearing in section 14A(1) clearly mean that there must be actual expenditure. Of course, the actual expenditure must be for earning the exempt income. We have already pointed out above, that we do not subscribe to the narrow interpretation sought to given to the words ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
