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TMI Blog2018 (12) TMI 1147X X X X Extracts X X X X X X X X Extracts X X X X ..... e income chargeable. The Tribunal had to go into this question only. What the Tribunal has done is simply amazing. Now Section 14A provides that in respect of exempt income the expenditure for earning the said income shall not be allowed. Tribunal ruled that the said interest payment by the assessee in acquiring control of the two companies would result in earning exempt dividend income and, therefore, the same was not allowable. It was as if an imaginery income and expenditure of a subsequent assessment year was taken into account for calculating the income of a particular previous year. All that the Tribunal was required to ascertain was whether the interest paid on fund generated for the purpose of gaining control of the two co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be allowed in computing the income chargeable under the head Profits and gains of business or profession . Advancing her arguments simply they argued that this expenditure of payment of interest was incurred by the assessee for the purpose of augmenting its business and was allowable by reason of the ratio laid down by a division bench of this Court in Commissioner of Income Tax Versus Rajeeva Lochan Kanoria reported in [1994]208ITR 616(Cal). Section 37 covers expenditure of a general nature which are not classifiable under Sections 30 to 36. But, they ought not to be capital expenditure or personal expenses of the assessee. That expenditure which is wholly and exclusively laid out for the purpose of business or profession sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered opinion even if the assessee had retained controlling interest in these two companies by making the investment, the expenditure was for the earning of the dividend income which was claimed by the assessee as exempt from tax. The provisions of section 14A as amended by the Finance Act, 2006 with effect from 1st April, 2007 clearly provided that the deduction could not be allowed in respect of expenditure incurred by the assessee in relation to income which did not form part of the total income of the assessee. Since the investments have yielded the dividend income and there is no direct nexus between the investments made and salary earned by the assessee as managing director of the aforestated companies expenditure on interest, to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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