ELP Tax Alert: Supreme Court upholds disallowance of expenditure under Section 14A on strategic investments in subsidiaries and shares held as ‘stock-in-trade’



180321 ELP Tax Alert - Maxopp Investments

Recently, the Supreme Court in the case of Maxopp Investment Ltd. v. CIT has upheld that the provisions of Section 14A of the Income-tax Act, 1961 apply regardless of the motive behind making the investment. The Court rejected the ‘dominant purpose test’ and reiterated the ‘theory of apportionment’ of expenditure. The Court held that expenditure attributable to earning exempt income has to be disallowed and cannot be treated as business expenditure.

Our Alert on the case is attached herewith.

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