TaxTMI 
TaxTMI 
2018 (11) TMI 877
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.... was legally justified in deleting the addition of Rs. 3,75,183/- made u/s.14A read with Rule 8D following the Board's Circular 5/2014? 2. Whether the Tribunal was legally justified in not considering the judgment of Hon'ble Supreme Court in the case of Godrej and Boyce Ltd. where the purpose of Section 14A read with Rule 8D has been interpreted? 3. Counsel for the appellant has taken us to the judgment of the Supreme Court in Godrej and Boyce Manufacturing Company Limited vs. Dy. Commissioner of Income Tax and Ors. AIR 2017 SC 2675 wherein it has been held as under:- 24. The object behind the introduction of Section 14A of the Act by the Finance Act of 2001 is clear and unambiguous. The legislature intended to check th....
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.... us to the CBDT circular dt. 11.2.2014 the relevant para of which reads as under:- 3. The matter has been examined in the Board. It is pertinent to mention that section 14A of the Act was introduced by the Finance Act, 2001 with retrospective effect from 01.04.1962. The purpose for introduction of section 14A with retrospective effect since inception of the Act was clarified vide Circular No. 14 of 2001 as under: "Certain incomes are not includible while computing the total income, as these are exempt under various provisions of the Act. There have been cases where deductions have been claimed in respect of such exempt income. This in effect means that the tax incentive given by way of exemptions to certain categories of i....
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....axes, in exercise of its powers under section 119 of the Act hereby clarifies that Rule 8D read with section 14A of the Act provides for disallowance of the expenditure even where taxpayer in a particular year has not earned any exempt income. 5. She has also relied on the observations made by the AO which reads as under:- 2.2 The submission of the assessee has been considered and found not acceptable. The Central Board of Direct Taxes vide Circular No.05/2014 clarified the issue and its relevant portion is as under:- "Thus, the legislative intent is to allow only that expenditure which is relatable to earning of income and it therefore follows that the expenses which are relatable to earning of exe3mpt income have to b....
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....which does not form part of the total income under this Act. The Ld. AR of the assessee has relied on the decision of Hon'ble P&H High Court in the case of CIT V Winsome Textile Industries Ltd. (2009) 319 ITR 204 is squarely not covered as the assessee has used its borrowed fund for such investments. Therefore, the disallowance under section 14A of the Income-Tax Act, 1961 is calculated as prescribed under rule 8D of the Income-Tax Rules, 1962 is as under and added to the total income of the assessee:- The expenditure in relation to income which does not form part of the total income shall be the aggregate of following amounts, namely:- (I) Amount of expenditure directly relating to income which does not form part of total income. ....