TaxTMI 
TaxTMI 
2011 (7) TMI 1197
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.... Income Tax Appeal No. 565 of 2006. 2. This appeal under Section 260A of the Income-Tax Act, 1961 (for short "the Act") has been filed by the revenue against the order dated 24.4.2006, passed by the Income Tax Appellate Tribunal Special Bench, Chandigarh (in short "the Tribunal") in ITA No. 26/CHANDI/2000, relating to the assessment year 1996-97. 3. The substantial questions of law claimed by the revenue in all the four appeals mentioned above are as under: " (i) Whether in the facts and circumstances of the case, the Hon'ble ITAT is justified in holding that the Project Survey Expenses should be treated as Revenue Expenditure whereas the Project Survey Expenses are in the nature of Capital Expenditure? (ii) Whether in the facts....
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...., 1961?" 5. The facts, in brief, necessary for adjudication as narrated in the appeal, are that the respondent-assessee filed return for the assessment year 1996-97 on 28.11.1996 showing total income of Rs. 23,46,546/-. However, assessment under Section 143(3) was framed at an income of Rs. 3,01,85,241/- on 24.12.1998. During assessment it was noticed that the assessee had debited an expenditure of Rs. 5,22,435/- on the preparation of survey reports but no income was shown by it on account of sale of survey reports. It was further observed that since no survey report was sold during the year, the whole of the expenditure of Rs. 5,22,435/- formed stock-intrade of the assessee and thus, an addition of the said amount was made by the assess....
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....nt of expenses attributable to the earning of such dividend income and this is how the revenue is once again in appeal in this Court. 8. In Income Tax Appeal No.568 of 2006, additionally, during the course of assessment proceedings, the deduction under Section 36(1)(viii) was restricted to the extent of amount of reserve created. On appeal to CIT(A) filed by the assessee, the assessing officer was directed to afford an opportunity to the assessee to create further reserve. The Tribunal had dismissed the appeal of the revenue. 9. We have heard learned counsel for the parties and have perused the record. 10. Learned counsel for the appellant-revenue very fairly accepted that question Nos. (i) and (iii) mentioned above claimed in all ....
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....r of Income Tax vs. United Collieries Ltd. (1993) 203 ITR 857 (Calcutta). Learned counsel also relied upon Commissioner of Income Tax vs. Central Bank of India (2003) 264 ITR 522 (Bombay) and State Bank of Indore vs. Commissioner of Income Tax (2005) 275 ITR 23 (MP). It was contended that it was only the actual expense incurred for earning dividend which was to be deducted from the dividend income for calculating the admissible deductions under Section 80M of the Act. It was urged that the plea of the Revenue that proportional expenses should also be reduced, was against the statute. 13. We have given our thoughtful consideration to the respective submissions of the learned counsel for the parties and find force in the submissions of ....
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....relation to exempt income against taxable income and at the same time avail the tax incentive by way of exemption of exempt income without making any apportionment of expenses incurred in relation to exempt income. The basic reason for insertion of Section 14A is that certain incomes are not includible while computing total income as these are exempt under certain provisions of the Act. In the past, there have been cases in which deduction has been sought in respect of such incomes which in effect would mean that tax incentives to certain incomes was being used to reduce the tax payable on the non-exempt income by debiting the expenses, incurred to earn the exempt income, against taxable income. The basic principle of taxation is to tax the....
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....ome for the purpose of chargeability to tax. The theory of apportionment of expenditures between taxable and non-taxable has, in principle, been now widened under Section 14A. Reading Section 14 in juxtaposition with Sections 15 to 59, it is clear that the words "expenditure incurred" in Section 14A refers to expenditure on rent, taxes, salaries, interest, etc. in respect of which allowances are provided for (see Sections 30 to 37)." 14. The apex Court had specifically recorded that the theory of apportionment of amount of expense between taxable and nontaxable income stood widened by incorporation of Section 14A. It was further noticed that the expression 'expenses incurred' occurring in Section 14A referred to tax, salary, interest etc....