TaxTMI 
TaxTMI 
2018 (10) TMI 1037
X X X X Extracts X X X X
X X X X Extracts X X X X
....red to as "the Tribunal") in ITA No. 488/Chd/2015, claiming the following substantial questions of law:- 1. Whether in the facts and circumstances of the case and in law, the Hon'ble ITAT was right in holding that the provisions of Section 14A as clarified by CBDT Circular No.5 of 2014, were not attracted as the assessee has not earned any exempt income during the year despite the fact that the assessee had invested a huge sum from which no income was shown while there was a considerable financial outgo on interest/financial charges on borrowed funds? 2. Whether in the facts and circumstances of the case and in law, the Hon'ble ITAT was right in relying on the decision in the case of Lakhani Marketing when the CBDT Circular No.5....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bmitted that the Tribunal has erred in law while upholding the decision of the CIT(A) as it is clarified vide CBDT Circular dated 11.2.2014 that Section 14A of the Act provides for disallowance of expenditure even where taxpayer has not earned any exempt income. In support of her contention, learned counsel has relied upon the following judgments: I. Commissioner of Income Tax, West Bengal III, Calcutta v. Rajendra Prasad Moody, Calcutta, AIR 1979 SC 373; II. Maxopp Investment Ltd. v. Commissioner of Income Tax (2018) 402 ITR 640 (SC); III. Commissioner of Income Tax v. Walfort Share and Stock Brokers (2010) 326 ITR 1 (SC); and IV. Godrej and Boyce Mfg. Co. Ltd. v. Deputy Commissioner of Income Tax and another (2010) 328 ITR 81 (....
X X X X Extracts X X X X
X X X X Extracts X X X X
....all determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance with such method as may be prescribed, if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under this Act. (3) The provisions of sub-section (2) shall also apply in relation to a case where an assessee claims that no expenditure has been incurred by him 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 Asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d fructify into any benefit." 9. It was laid down in Maxopp Investment Ltd's case (supra) that the provisions of Section 14A of the Act can be applied to the case of a person who was a dealer in shares. It was concluded by the Apex Court in Walfort Share and Stock Brokers' case (supra) that the basic principle of taxation was to tax the net income, i.e. gross income minus the expenditure and on the same analogy the exemption was also in respect of net income and where the gross income would not form part of total income, its associated or related expenditure would also not be permitted to be debited against other taxable income. Further, it was observed that for the purpose of computing the total income under this Chapter, no dedu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gh Court declares the law on the question arising for consideration, it would not be appropriate for the court to direct that the circular should be given effect to and not the view expressed in a decision of this court or the High Court. So far as the clarifications/circulars issued by the Central Government and of the State Government are concerned they represent merely their understanding of the statutory provisions. They are not binding upon the court. It is for the Court to declare what the particular provision of statute says and it is not for the Executive. Looking at from another angle, a circular which is contrary to the statutory provisions has really no existence in law. In Lakhani Marketing Inc's case (supra), this Court whi....