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IT A No . 20 7 7/ K o l/ 20 1 6 Ass essm e nt Ye ar : 20 1 1-1 2 salaries, interest, etc. in respect of which allowances are provided for (see ss. 30 to 37). Every payout is not entitled to allowance for deduction. These allowances are admissible to qualified deductions. These deductions are for debits in the real sense. A pay-back does not constitute an "expenditure incurred" in terms of s. 14A. Even applying the principles of accountancy, a pay-back in the strict sense does not constitute an "expenditure" as it does not impact the P&L a/c. Pay-back or return of investment will impact the balance sheet whereas return on investment will impact the P&L a/c. Cost of acquisition of an asset impacts the balance sheet. Return of investment brings down the cost. It will not increase the expenditure. Hence, expenditure, return on investment, return of investment and cost of acquisition are distinct concepts. Therefore, one needs to read the words "expenditure incurred" in s. 14A in the context of the scheme of the Act and, if so read, it is clear that it disallows certain expenditures incurred to earn exempt income from being deducted from other income which is includible in the "total income" for the purpose of chargeability to tax. The scheme of ss. 30 to 37 is that profits and gains must be computed subject to certain allowances for deductions/expenditure. The charge is not on gross receipts, it is on profits and gains. Profits have to be computed after deducting losses and expenses incurred for business. A deduction for expenditure or loss which is not within the prohibition must be allowed if it is on the facts of the case a proper debit item to be charged against the incomings of the business in ascertaining the true profits. A return of investment or a pay- back is not such a debit item as explained above, hence, it is not "expenditure incurred" in terms of s. 14A. Expenditure is a pay-out. It relates to disbursement. A pay-back is not an expenditure in the scheme of s. 14A. For attracting s. 14A, there has to be a proximate cause for disallowance, which is its relationship with the tax exempt income. Pay-back or return of investment is not such proximate cause, hence, s. 14A is not applicable in the present case. Thus, in the absence of such proximate cause for disallowance, s. 14A cannot be invoked. Return of investment cannot be construed to mean "expenditure" and if it is construed to mean "expenditure" in the sense of physical spending still the expenditure was not such as could be claimed as an "allowance" against the profits of the relevant accounting year under ss. 30 to 37 and, therefore, s. 14A cannot be invoked. Hence, the two asset theory is not applicable in this case as there is no expenditure incurred in terms of s. 14A."