Section 14A Disallowance cannot be made if no expenditure was incurred to earn exempt income

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. ...