Case Law Details
CIT Vs. Syndicate Bank (Karnataka High Court)
Conclusion: 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. As assessee had not incurred any expenditure in relation to dividend income, therefore, no dis allowance could be made under section 14A.
Held: AO held that since exempted dividend did not form part of income, assessee was not entitled to disallowance of proportionate expenses as required under section 14A. Accordingly, an addition of Rs. 20,38,002/- was made by AO. It was held that 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. [See: Walfort Share and Stock Brokers (P.) Ltd. as well as Maxop Investments Ltd.]. In the instant case, assessee had admittedly not incurred any expenditure. This case pertained to income on dividend, which by no stretch of imagination could be treated to be an expenditure to attract the provisions of section 14A.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
These appeals under section 260-A of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’, for short) have been filed by the revenue. ITA No.97/2010 was admitted by a bench of this court on the following substantial questions of law:
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