“Section 36(1)(viia)(c)”
The decision most relied on for Section 36(1)(viia)(c) is Godrej & Boyce Mfg. Co. Ltd. v. DCIT, Range10(2), Mumbai (234 CTR 1), cited in 97 judgments on BharatTax.
Leading authorities on Section 36(1)(viia)(c)
Expenditure incurred by an assessee in relation to income not forming part of the total income is not deductible under Section 14A(1). The disallowance must be restricted to direct and indirect expenses having an approximate connection with the earning of such exempt income, and Rule 8D applies from Assessment Year 2008-09.
Disallowance under Section 14A read with Rule 8D is attracted even when no exempt income is actually earned from investments in the relevant year, as long as the income from such investments does not or shall not form part of the total income.
The fiction created by Section 50(1) and (2) of the Income Tax Act, 1961, applies only to the computation of capital gains under Sections 48 and 49, and not to other provisions. Section 54E is available for exemption irrespective of whether the asset is depreciable or not.
Disallowance under Section 14A is not to be considered while computing book profits under Section 115JB of the Act.
Securitisation income derived from the business of long-term housing finance is eligible for deduction under section 36(1)(viii) of the Income Tax Act, 1961, even if the assessee continues to bear the risk of default.
Investments made by a bank to maintain the Statutory Liquidity Ratio (SLR) mandated by the RBI, which yield tax-free interest, are not subject to disallowance under Section 14A. The mandatory nature of these investments requires their exclusion when computing disallowances.
Revision proceedings under section 263 of the Income-tax Act, 1961 cannot be initiated if the Assessing Officer has considered an issue and adopted a view permissible in law.
Amendments to Section 36(1)(viii) are prospective, meaning deductions allowed for amounts transferred to a special reserve prior to the amendment, and subsequently withdrawn, cannot be subjected to tax for assessment years prior to the amendment's effective date.
