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TA 502/D/12 & CO 68/D/2014 Vireet Investment P. Ltd.

4.18. Ld. counsel further submitted that scope of section 14A and section 115JB of the act are entirely different. He submitted that u/s 14A of the Act disallowance is made of expenditure in relation to the earning of income not forming part of the total income. Thus, section 14A takes within its sweep both direct and indirect expenditure having proximate connection with earning of exempt income. However, under clause (f) of Explanation 1 to section 115JB of the Act, only those expenditure debited to the profit and loss amount, which are relatable to earning of income exempt u/s 10 (excluding section 10(38) or section 11 or section 12 are added back while computing adjusted book profit. Thus, only direct expenditure associated with the earning of said income would be added back.

6.2. Now the question before us is, whether the amount or amounts of expenditure relatable to exempt income as contemplated in clause

(f) to Explanation 1 to section 115JB(2) could be arrived at by resorting to provisions of section 14A or not. The submission of Ld. Principal CIT (DR) is that it cannot be disputed that the object of section 14A was only to determine the expenditure in relation to exempt income as noted earlier. His contention, therefore, is that the object of sec. 14A and clause (f) to Explanation 1 to Section 115JB(2) is same and, therefore, it cannot be disputed that section 14A can be resorted to for finding out the expenditure relatable to any income which is exempt. In this regard Ld. Principal CIT(DR) has referred to some of the well settled principles of statutory interpretation which are discussed hereunder.

6.9. In the case of Canada Sugar Refinery Co. Vs. R (1898) AC 735 at page 742, it was observed that every clause of a statute is to be construed with reference to the context and other clauses of the Act as far as possible to make a consistent enactment of the whole statute or series of statutes relating to the subject matter.

6.10. Thus, the submission of ld. CIT(DR) IS that when basic object and purpose of section 14A and clause (f) to Explanation 1 to section 115JB(2) is same, then it cannot be said that merely because section 14A has not been mentioned in clause (f), therefore, it has no application. The mode of computation with same purpose cannot be differently made merely because section 115JB creates a deeming section. The object of deeming provisions is to substitute the total income computed under normal provisions by that computed under MAT provisions. Submission of ld. CIT(DR) is that this cannot be extended to computation for same items under normal as well as MAT provisions. Under the provisions of section 14A, both direct and indirect expenses in relation to earning of exempt income are to be reduced. Therefore, different meaning cannot be ascribed in clause (f) and, therefore, the submission of ld. counsel for the assessee that only directly relatable expenditure is to be reduced, cannot be accepted.

6.13. Further reasoning advanced by ld. CIT(DR) is that section 14A has been incorporated much after the incorporation of Chapter XIIB in 1987. Section 14A was incorporated just after section 14, which classifies the head of income for computation of total income. This section was made applicable with respect to determination of total income. The MAT provisions are for computation of income from business in case of specific companies. Therefore, it cannot be said that section 14A had no applicability to MAT provisions, which were existing when section 14A was introduced for the first time. Therefore, section 14A is applicable for all kinds of incomes, which are claimed as exempt by assessee in the Income-tax Act.