TMI Blog2020 (1) TMI 1141X X X X Extracts X X X X X X X X Extracts X X X X ..... NVESTMENT LTD. [ 2018 (3) TMI 805 - SUPREME COURT] In the instant case, the assessee has admittedly not incurred any expenditure. This case pertains to income on dividend, which by no stretch of imagination can be treated to be an expenditure to attract the provisions of Section 14A of the Act. In view of aforesaid enunciation of law by the Supreme Court, the first substantial question of law framed by this court is answered in favour of the assessee and against the revenue. Whether provisions of Section 115JA apply to the Banking Companies? - HELD THAT:- This court by an order passed [ 2020 (1) TMI 1116 - KARNATAKA HIGH COURT] 2has already held that the provisions of Section 115JA do not apply to the banking companies. Effect of section 14A amendment - HELD THAT:- Issue squarely covered by the decision of the Supreme Court in CIT VS. ESSAR TELEHOLDINGS LTD. [ 2018 (2) TMI 115 - SUPREME COURT] wherein it has been held that provisions of Section 14A read with rule 8D of the Income Tax Rules are prospective in nature and can not be applied to any assessment year prior to Assessment Year 2008-09. Accordingly, the aforesaid substantial question of law is answered agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of any income credited to P L account, which is covered by Sections 10, 10A, 10B 11 or 12 of the Act? 3. On account of similarity of the issues involved in the substantial questions of law, they were heard analogously and are being decided by this common judgment. For the facility of reference, facts from ITA No.97/2010 are being referred to. 4. The assessee filed a return of income on 28.11.2000 declaring gross total income of ₹ 2,23,249/-. The assessee declared ₹ 2,06,92,53,033/- as book profit under Section 115JA of the Act. The return was processed under Section 143(1) of the Act resulting in refund of ₹ 10,62,37,618/-. Thereafter a notice was issued under Section 143(2) of the Act. The Assessing Officer by an order dated 31.12.2002 inter alia held that since exempted dividend does not form part of income, the assessee is not entitled to disallowance of proportionate expenses as required under Section 14A of the Act. Accordingly, an addition of ₹ 20,38,002/- was made by the Assessing Officer. The aforesaid order was upheld in appeal by the Commissioner of Income Tax (Appeals). Being aggrieved, the assessee filed an appeal before the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner of Income Tax (Appeals). 6. On the other hand, learned counsel for the assessee has submitted that in order to attract the applicability of Section 14A of the Act, there has to be a pay out i.e., an assessee has to incur expenditure. While inviting the attention of this Court to paragraph 17 of the decision in the case of WALFORT supra, it is pointed out that expenditure is a pay out and pay back is not expenditure in the scheme of Section 14A of the Act. It is further submitted that condition precedent for invoking Section 14A of the Act is pay out. In the instant case, since the assessee has not incurred any expenditure, therefore, the provisions of Section 14A of the Act do not apply to the fact situation of the case. 7. It is also argued that a division bench of Punjab Haryana High Court in PRINCIPAL COMMISSION OF INCOME TAX VS. STATE BANK OF PATIALA (2017) 78 TAXMANN.COM 3 (PUNJAB HARYANA) has held that return of investment would not fall within the expression expenditure incurred under Section 14A of the Act. It is further submitted that when no expenditure is incurred by the assessee in earning dividend income, no notional expenditure could be deducte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 9. From perusal of Section 14A of the Act, it is evident that for the purposes of computing the total income under this chapter, no deduction shall be allowed in respect of the expenditure incurred by the assessee in relation of the income which does not form part of his total income under the Act. The expenditure, the return of investment and cost of requisition are distinct concepts. Therefore the word incurred in Section 14A of the Act have to be read in the context of the scheme of the Act and if so read, it is clear that it disallows certain expenditures incurred to earn exempt income from being deducted from other incomes which is includable in the total income for the purposes of chargeability to the tax. It is equally well settled that expenditure is a pay out. In order to attract applicability of section 14A of the Act, there has to be a pay out and return of investment or a pay back is not such a debit item. [ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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