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TMI Blog2018 (11) TMI 877X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 3,75,183/- made u/s.14A read with Rule 8D following the Board's Circular 5/2014? 2. Whether the Tribunal was legally justified in not considering the judgment of Hon'ble Supreme Court in the case of Godrej and Boyce Ltd. where the purpose of Section 14A read with Rule 8D has been interpreted? 3. Counsel for the appellant has taken us to the judgment of the Supreme Court in Godrej and Boyce Manufacturing Company Limited vs. Dy. Commissioner of Income Tax and Ors. AIR 2017 SC 2675 wherein it has been held as under:- 24. The object behind the introduction of Section 14A of the Act by the Finance Act of 2001 is clear and unambiguous. The legislature intended to check the claim of allowance of expenditure incurred towards earning exem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under:- 3. The matter has been examined in the Board. It is pertinent to mention that section 14A of the Act was introduced by the Finance Act, 2001 with retrospective effect from 01.04.1962. The purpose for introduction of section 14A with retrospective effect since inception of the Act was clarified vide Circular No. 14 of 2001 as under: "Certain incomes are not includible while computing the total income, as these are exempt under various provisions of the Act. There have been cases where deductions have been claimed in respect of such exempt income. This in effect means that the tax incentive given by way of exemptions to certain categories of income is being used to reduce also the tax payable on the non-exempt income by debiting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act provides for disallowance of the expenditure even where taxpayer in a particular year has not earned any exempt income. 5. She has also relied on the observations made by the AO which reads as under:- 2.2 The submission of the assessee has been considered and found not acceptable. The Central Board of Direct Taxes vide Circular No.05/2014 clarified the issue and its relevant portion is as under:- "Thus, the legislative intent is to allow only that expenditure which is relatable to earning of income and it therefore follows that the expenses which are relatable to earning of exe3mpt income have to be considered for disallowance, irrespective of the fact that whether any such income has been earned during the financial year or no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... V Winsome Textile Industries Ltd. (2009) 319 ITR 204 is squarely not covered as the assessee has used its borrowed fund for such investments. Therefore, the disallowance under section 14A of the Income-Tax Act, 1961 is calculated as prescribed under rule 8D of the Income-Tax Rules, 1962 is as under and added to the total income of the assessee:- The expenditure in relation to income which does not form part of the total income shall be the aggregate of following amounts, namely:- (I) Amount of expenditure directly relating to income which does not form part of total income. NIL (ii) In a case where the assessee has incurred expenditure by way of interest during the previous year which is not directly attributable to any partic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 14A of the Act this Court held that: Expenses allowed can only be in respect of earning of taxable income. In paragraph 17, this Court went on to observe that: Therefore, one needs to read the words "expenditure incurred" in Section 14A in the context of the scheme of the Act and, if so read, it is clear that it disallows certain expenditure incurred to earn exempt income from being deducted from other income which is includible in the "total income" for the purpose of chargeability to tax. The views expressed in Walfort Share and Stock Brokers P. Ltd. (supra), in our considered opinion, yet again militate against the plea urged on behalf of the Assessee. 34. For the aforesaid reasons, the first question formulated in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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