Clarification regarding disallowance of expenses under section 14A of the Income-tax Act in cases where corresponding exempt income has not been earned during the FY -regarding.

Disallowance under section 14A: expenses can be disallowed even if no exempt income was earned in the year.

The Board clarifies that disallowance under section 14A read with Rule 8D applies even where an assessee has not earned exempt income in the year, because the statutory wording ''includible'' and ''income under the Act'' and Rule 8D's formulas tie disallowance to investments yielding exempt income rather than to receipts in the year.