TMI Blog2013 (5) TMI 1018X X X X Extracts X X X X X X X X Extracts X X X X ..... any engaged in the business of manufacturing, processing and exporting of Pulvarised Garnet Abrasives Grit. The assessee filed its return of income for the Assessment Year 2007-08 on 30-10-2007 declaring its income to be Nil, after claiming deduction of ₹ 26,46,13,089/- u/s. 10B of the Income Tax Act, 1961 (herein after referred as the Act ). The case of the assessee was selected for scrutiny and notice u/s. 143(2) was issued to the assessee on 12-09-2008. The Assessing Officer (AO) vide assessment order dt. 31-12-2009 made additions/dis-allowances inter-alia on account of deduction claimed u/s. 10B of the Act and dis-allowance of expenditure u/s. 14A r.w.r. 8D of Income Tax Rules, 1962 (herein after referred to as the Rules ). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he CIT(A) is restricted the disallowance u/s. 14A of ₹ 69,17,637/- instead of ₹ 76,59,387/- as determined by the AO. The ld. DR further submitted that the expenditure relating to exempt income is not allowable as per the provisions of the Section 37 of the Act and the CIT(A0 ought to have upheld the quantification of the dis-allowance as per the provisions of Section 40A. The ld. DR strongly supported the order of the AO on the issue. 5. On the other hand, Dr. Anitha Sumanth, appearing on behalf of the assessee submitted that the CIT(A) has erred in confirming the disallowance u/s. 14A to the extent of ₹ 69,79,637/-. The ld. Counsel submitted that since the assessee has not earned any dividend income during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction u/s. 10B excluded the aforesaid amounts from export turnover but did not exclude the same from the total turn-over. It is a well settled law that expenses on freight, telecommunication or insurance attributable to the delivery of the articles or things out-side India or expenditure incurred in foreign exchange in providing technical services outside India which are excluded from export turn-over should also be excluded from total turn-over while computing deduction under the provisions of Section 10B of the Act. In view of the well settled law, this ground of appeal of the Revenue is dismissed. 7. The Second Ground on which the order of the CIT(A) has been assailed by both the parties is dis-allowance of expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration and, therefore, no disallowance can be made by invoking the provisions of section 14A of the Act. We do not find any force in this contention of the assessee. When the expenditure of interest is incurred in relation to income which does not form part of total income, it has to suffer the disallowance irrespective of the fact whether any income is earned by the assessee or not. Section 14A does not envisage any such exception. This is even if the interest paid on borrowings for the purchase of shares were allowable under section 57 as an expenditure incurred for earning or making income as held by the Supreme Court in the case of Rajendra Prasad Moody [1978] 115 ITR 519 or under section 36(1)(iii) as an expenditure incurred wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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