GODREJ & BOYCE MANUFACTURING COMPANY LIMITED versus DY. COMMISSIONER OF INCOME-TAX & ANR.

Citation: [2017] 3 S.C.R. 602 · Decided: 08-05-2017 · Supreme Court of India · Bench: RANJAN GOGOI · Disposal: Appeal(s) allowed

Cited by 2 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

[2017] 3 S.C.R .. 602 
A 
GODREJ & BOYCE MANUFACTURING COMPANY LIMITED 
8 
c 
D 
E 
F 
G 
H 
v. 
DY. COMMISSIONER OF INCOME-TAX & ANR. 
(Civil Appeal No. 7020of2011) 
MAYOS,2017 
[RANJAN GOGOi AND ASHOK BHUSHAN, JJ.] 
Income Tax Act, 1961 - s. 14A - Expenditure incurred in 
relation to income not includible in total income - Phrase ''income 
which does not form part of total income under this Act" in s. l 4A -
Scope of - If includes dividend income on shares in respect of 
which tax is payable u!s. 115-0 and income on units of 111utual funds 
on which tax is payable u/s. 115-R - Held: s.14A would apply to 
dividend income on which tax is payable u/s. 115-0-: Pliiin reading 
of s.14A shows that the income must not be includible in the total 
income of the assessee - Once the said condition is satisfied, the 
expenditure incurred in earning the said income cannot be allowed 
to be deducted - Thus, s. l 4A would operate to disallow deduction 
of all expenditure incurred in earning the dividend income uls. 115-0 
which is not includible in the total income of the assessee - On facts 
and in the circu111stances of the assessee s case, for the assessment 
year in question, the assessee is entitled to the benefit of clai111 of 
dividend income without any deduction - ss.115-0, 115-R. 
Allowing the appeal, the Court 
HELD: 1.1 The object behind the introduction of Section 
14A of the Income Tax Act, 1961 by the Finance Act of 2001 is 
clear and unambiguous. The legislature intended to check the 
claim of allowance of expenditure incurred to.wards earning 
exempted income in a situation where an assessee has both 
exempted and non-exempted income or includible or non-
includible income. While there can be no doubt that if the income 
in question is taxable and, therefore, includible in the total 
income, the deduction of expenses incurred in relation to such 
an income must be allowed, such deduction would not be 
permissi.ble merely on the ground that the tax on the dividend 
received by the assessee has been paid by the dividend paying 
company and not by the recipient assessee, when under Section 
602 
GODREJ & BOYCE MANUFACTURJNG COMPANY LTD. v. 
603 
DY. COMMISSIONER OF INCOME-TAX 
10(33) of the Act such income by way of dividend is not a part of A 
the total income of the recipient asscssee. A plain reading of 
Section 14A would go to show that the income must not be 
includible in the total income of the asscssce. Once the said 
condition is satisfied, the expenditure incurred in earning the 
said income cannot be allowed to be deducted. The Section does 
B 
not contemplate a situation where even though the income is 
taxable in the hands of the dividend paying company the same to 
be treated as not includible in the total income of the .recipient 
assessee, yet, the expenditure incurred to earn that income must 
be allowed on the basis that no tax on such income has been paid 
by the asscssee. Such a meaning, if ascribed to Section 14A, would 
be plainly beyond what the language of Section 14A can be 
understood to reasonably convey. [Para 24] '(622-C-G] 
1.2 The literal meaning of Section 14A, far from giving rise 
to any absurdity, appears to be wholly consistent with the scheme 
of the Act and the object/purpose of levy of tax on income. 
Therefore, the well entrenched principle of interpretation that 
where the words of the statute are clear and unambiguous 
recourse cannot be had to principles of interpretation other than 
the literal view would apply. [Para 27] [624-C-D] 
1.3 While it is correct that Section 10(33) exempts only 
dividend income under Section 115-0 of the Act and there arc 
other species of dividend income on which tax is levied under 
the Act, it cannot be seen how the said position in law would 
assist the asscsscc in understanding the provisions of Section 
14A in the manner indicated. What is required to be construed is 
the provisions of Section 10(33) read in the light of Section 115-
0 of the Act. So far as the species of dividend income on which 
tax is payable under Section 115-0 of the Act is concerned, the 
earning of the said dividend is tax free in the hands of the assessee 
and not .includible in the total income of the said assessee. If that 
is so, it cannot be seen how the operation of Section 14A, of the 
Act to such dividend income can be foreclosed. The fact that 
Section 10(33) and Section 115-0 of the Act were brought in 
together; deleted and reintroduced later in a composi

Excerpt shown. Read the full judgment & AI analysis in Lexace.