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of <h1>Section 14A: Disallow Expenses for Exempt Income Even If None Earned, Clarifies CBDT with Rule 8D Support.</h1> The circular clarifies that under Section 14A of the Income-tax Act, expenses related to exempt income must be disallowed even if no exempt income is earned during the financial year. The legislative intent is to ensure that only expenses related to taxable income are deductible, and this disallowance applies irrespective of the actual earning of exempt income. The clarification is supported by the language in Rule 8D of the Income-tax Rules, which does not require exempt income to be included in a particular year's income for disallowance to apply. The Central Board of Direct Taxes emphasizes this interpretation to ensure consistency in tax assessments.
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