Clarification in respect of disallowance under section 14A in absence of any exempt income during an assessment year

Disallowance under section 14A clarified: provisions apply even when exempt income has not accrued, barring related deductions.

Clarification that disallowance under section 14A applies even where exempt income has not accrued, arisen or been received in the relevant previous year if expenditure was incurred in relation to such exempt income; insertion of an Explanation and a non obstante clause to ensure no deduction is allowed in relation to exempt income. Proposed amendment to section 37(1) adds an Explanation that expenditure which is an offence or prohibited by law includes offences under foreign law, benefits whose acceptance breaches governing rules of the recipient, and payments to compound offences.