|DATE:||(Date of pronouncement)|
|DATE:||March 28, 2011 (Date of publication)|
|Click here to download the judgement (Hoshang_Nanavati_14A_depreciation_full.pdf)|
S. 14A disallowance cannot be made for “depreciation”
The assessee, a partner in a firm of solicitors, received Rs 14 lakhs towards remuneration as a working partner and Rs 46 lakhs towards share of profit in the partnership. The question arose whether, given that the remuneration was taxable as business profits, disallowance u/s 14A could be made in respect of (a) depreciation and (b) deduction u/s 80D in respect of health insurance premium. HELD by the Tribunal:
(a) S. 14A permits a disallowance of “expenditure incurred by the assessee” and not of “allowance admissible” to him. There is a distinction between “expenditure” and “allowance”. The expression “expenditure” does not include allowances such as depreciation allowance. Accordingly, depreciation cannot be the subject matter of disallowance u/s 14A (ratio of Nectar Beverages 314 ITR 314 (SC) followed);
(b) Similarly, the deduction u/s 80D is not expenditure for earning tax-free income but is a permissible deduction from gross total income under Chapter VIA.