ORDER SHEET IN HIGH COURT AT CALCUTTA Special Jurisdiction (Income Tax) ORIGINAL SIDE ITA No. 279 of 2004 C. I. T. - II, KOLKATA Versus M. K. J. DEVELOPERS LTD. BEFORE: Hon'ble JUSTICE GIRISH CHANDRA GUPTA Hon'ble JUSTICE ARINDAM SINHA Date : 25th February, 2015. Ms. M.Bhargava, Adv. for Appellant Mr. J.P. Khaitan, Senior Advocate, Mr.Debasis Mitra, Adv. and Mr.G.S.Gupta, Adv. for Respondent Court : subject matter of challenge in this appeal is judgment and order dated 11th December, 2003 by which learned Tribunal allowed appeal preferred by assessee and deleted disallowance of sum of Rs.19,12,776/- applying section 14A of Income Tax Act. learned Tribunal was of opinion that proviso to Section 14A of Income Tax Act came to rescue of assessee. Aggrieved by order of learned Tribunal, present appeal has been preferred by revenue. Assessing Officer disallowed expenditure, inter alia, on basis of following reason : 2 entire sum of Rs.19,12,776/- is interest on account of investment in acquiring shares in M/s. Mukund Engg. Ltd. which has yielded dividend of Rs.2,43,666/-. Since interest has been debited in P & L A/c. entire interest of Rs.19,12,776/- is attributable to earning of exempted income i.e. dividend of Rs.2,43,666/-. In view of clear cut intention of legislature no expenditure attributable to earning of exempted income is allowed as deduction. I, therefore, disallow entire interest of Rs.19,12,776/- which is directly attributable to earning of dividend income of Rs.2,43,666/-. Mr. Khaitan, learned senior Advocate has not disputed that under section 14A expenditure incurred for earning exempt income cannot be allowed to be deducted from taxable income of business. only submission is that expenditure on account of interest was incurred both for purposes of earning exempt income as also for purpose of capital gains which is taxable. This fact has also been endorsed by learned Tribunal. That may be true. But in that case assessee could not have got disallowance deleted altogether He could have insisted upon determination under sub-section (2) of section 14A. It 3 is, however, contended that sub-section (2) was introduced later on. Even in that case, there can be no quarrel with contention that sub-section is merely clarificatory. law always has been that expenditure incurred for purpose of earning exempt income cannot be deducted from taxable income earned from business. in that case, assessee could have furnished one to one particulars for purpose of showing actual expenditure incurred for purpose of earning exempt income so that only that part of expenditure could have been disallowed. If assessee failed to discharge his burden, there is nothing that revenue could have done. For aforesaid reason, order under challenge is set aside. matter is remanded to Assessing Officer for purpose of giving opportunity to assessee to furnish one to one particulars. In event, he does so, Assessing Officer shall ascertain amount of interest incurred for purpose of earning exempt income and to that extent expenditure by way of interest shall be disallowed. (GIRISH CHANDRA GUPTA, J.) (ARINDAM SINHA, J.) km C. I. T. - II, Kolkata v. M. K. J. Developers Ltd