TaxTMI 
TaxTMI 
2006 (4) TMI 229
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.... of assessment under section 147 of the Income-tax Act, 1961, is in violation of section 14A of the Act or not in the given facts and circumstances of the case. 3. We have heard both the sides and gone through the case records. The briefly stated facts of the case are that the assessee claimed deduction under section 80P(2)(e) of the Act to the extent of Rs. 53,15,566. While completing the original assessments under section 143(3) of the Act for all the assessment years under consideration, the Assessing Officer allowed the entire deduction. Subsequently, the Assessing Officer issued notice under section 148 of the Act and in reassessment, he restricted the deduction under section 80P(2)(e) to the net receipts of Rs. 38,20,117 by reducin....
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.... 4. First of all, we have gone through the provisions of section 14A of the Act including proviso which reads as under: "14A. Expenditure incurred in relation to income not includible in total income.- For the purposes of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act: Provided that nothing contained in this section shall empower the Assessing Officer 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 ....
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....oceedings have become final before the first day of April, 2001, should not be reopened under section 147 of the Act to disallow expenditure incurred to earn exempt income by applying the provisions of newly inserted section 14A of the Act. 5. This may be brought to the notice of all offices in your region immediately." Further, the Departmental Circular No. 8 of 2002, dated 27th August, 2002 was issued elaborating the scope and effect of insertion of proviso to section 14A of the Act by the Finance Act, 2002 with effect from 11th May, 2001 and the relevant circular reads as under: "23. Amendment of section 14A.- 23.1 Through the Finance Act, 2001, a new section namely 14A was inserted in the Income-tax Act retrospectively with eff....
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....rm part of the total income and phraseology used in section 14A of the Act is that for the purpose of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee, in relation to the incomes which do not form part of total income. Under this Act, only the exempted income from the provisions of the Income-tax Act, is eligible for this section. The provisions of section 14A of the Act talks about the income which does not form part of the total income under this Act and not the deductions. The deductions are provided under Chapter VI-A from sections 80A to 80U of the Act, etc. etc. Here, Chapter VI-A of the Act talks about the deduction in computing the total income of the ass....
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....ction 14A of the Act do not speak about the deductions to be made in computing the total income as per the provisions of Chapter VI-A (sections 80A to 80U), even though as a result of such deductions, the taxable income is reduced wholly or partially. 7. In the present case in hand, the reopening was done as the income escaped due to excess claim of deduction under section 80P(2)(e) of the Act by allowing full by the Assessing Officer in the original assessment order passed under section 143(3) of the Act. In the given facts and circumstances of the case, we fairly feel that the reopening by the Assessing Officer is perfectly within the provisions of the law. Accordingly, we feel that the proviso to section 14A of the Act and circulars c....