rule 8D

Section 14A: Consolidating latest Judicial Developments

Income Tax - Ever since the advent of section 14A in the statute, it has evoked squall of controversy. While the purpose of the section was to compute taxable income by whisking away the expenses attributable to exempt income, the tax department always tried to use it for fetching some more fortunes. In this article attempt has been made to look into ...

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Section 14A disallowance Under Income Tax Act, 1961

Income Tax -  CA Ram Bajaj Introduction 1. Section 14A was first inserted by the Finance Act, 2001. However, same was inserted with retrospective effect from 1-4-1962. The inserted section reads as under:— ’14A. Expenditure incurred in relation to income not includible in total income.—For the purposes of computing the total income under th...

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Section 14A of Income Tax Act, 1961 – Controversial Provision

Income Tax - Section 14A was enacted vide Finance Act, 2001 w.r.e.f. 1-4-1962, so that net taxable income is actually taxed and no deduction is allowed against taxable income for expenditure incurred in earning exempt income. It was enacted to overcome the Supreme Court decision in the case of Rajasthan State Warehousing Corporation v. CIT [2000] 242 ...

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Lacuna In Section 14A And Rule 8D

Income Tax - Allowance of expenditure incurred in relation to exempted income during the assessment or otherwise would be prejudicial to the revenue that’s why Section 14A was introduced by the Finance Act 2001 with retrospective effect from 1st April 1962 in Chapter IV of the Income Tax Act 1961 which inter-alia provides for the disallowance of the...

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Sec 14A Expenditure incurred in relation to income not included in total income rw Rule 8D

Income Tax - Section 14A was introduced by the Finance Act, 2001 w.e.f. 1st April 1962 and will, accordingly apply to the assessment year 1962-63 and subsequent years. Till the assessment year 2008-09, there was no standard rule prescribed by the department. Therefore, assessing officers were applying various methods to disallow the expenditure under...

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Bombay high court to hear petition challenging Constitutional validity of Rule 8D

Income Tax - As earlier intimated to you, Writ Petition bearing No. 50 of 2010 (Indian Exporters Grievances Forum & Other vs. CIT) challenging the constitutional validity of Rule 8D has been admitted on 12.1.2010 by Hon’ble Shri Justice Dr. D.Y. Chandrachud and Hon’ble Shri Justice J.P. Devadhar of the Bombay High Court. ...

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Income from Assignment of patent for exploiting it commercially is Capital Gain

Bharat Serums & Vaccines Ltd. Vs. ACIT (ITAT Mumbai) - Section 55(2)(a) talks of right to manufacture, produce or process any article or thing. Therefore, as per the amended provisions, the right to manufacture/produce/process would be taxable under the head capital gains and cost has to be taken at Rs. Nil. ...

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SC decision on Controversy surrounding Section 14A disallowances

Godrej & Boyce Manufacturing Company Limited Vs DCIT & Anr. (Supreme Court of India) - The object behind the introduction of Section 14A of the Act by the Finance Act of 2001 is clear and unambiguous. The legislature intended to check the claim of allowance of expenditure incurred towards earning exempted income in a situation where an assessee has both exempted and non-exempted incom...

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Interest Paid by Firm to partners cannot be disallowed U/s. 14A

M/s. Syntholab Chemicals & Research Vs ACIT (ITAT Mumbai) - In this case basic issue to be decided was about the interest payment made by the partnership firm to the partners in light of the provisions of section 14A read with rule 8D of the Rules....

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Section 14A also applies to investment with dividend income held as stock in trade

M/s. Kalyani Barter Vs I .T.O. (ITAT Kolkata) - Assessing Officer to compute the disallowance as per Rule 8D by taking into consideration only those shares, which have yielded dividend income in the year under consideration. ...

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No disallowance U/s. 14A unless Assessee earns exempt Income during relevant previous year

Red Chillies Entertainment Pvt. Ltd. Vs Asstt. Commissioner of Income Tax (ITAT Mumbai) - ITAT followed Delhi High Court in Cheminvest and held that, unless during the relevant previous year, assessee earns any exempt income no disallowance under section 14A r/w rule 8D can be made....

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CBDT Circular No. 5/2014 dated 11/02/2014

Circular No. 5/2014-Income Tax - (11/02/2014) - Circular No. 5/2014-Income Tax Central Board of Direct Taxes, in exercise of its powers under section 119 of the Act hereby clarifies that Rule 8D read with section 14A of the Act provides for disallowance of the expenditure even where taxpayer in a particular year has not earned any exempt income....

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Notification No. 45/2008-Income Tax Dated: March 24, 2008 on Section 14A

Notification No. 45/2008-Income Tax - (24/03/2008) - INCOME TAX NOTIFICATION NO-45/2008, DT: March 24, 2008 Method for determining amount of expenditure in relation to income not includible in total income. 8D(1) Where the Assessing Officer, having regard to the accounts of the assessee of a previous year, is not satisfied with-(a) the correctness of ...

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Recent Posts in "rule 8D"

Income from Assignment of patent for exploiting it commercially is Capital Gain

Bharat Serums & Vaccines Ltd. Vs. ACIT (ITAT Mumbai)

Section 55(2)(a) talks of right to manufacture, produce or process any article or thing. Therefore, as per the amended provisions, the right to manufacture/produce/process would be taxable under the head capital gains and cost has to be taken at Rs. Nil. ...

Read More

SC decision on Controversy surrounding Section 14A disallowances

Godrej & Boyce Manufacturing Company Limited Vs DCIT & Anr. (Supreme Court of India)

The object behind the introduction of Section 14A of the Act by the Finance Act of 2001 is clear and unambiguous. The legislature intended to check the claim of allowance of expenditure incurred towards earning exempted income in a situation where an assessee has both exempted and non-exempted income or includible or non-includible income...

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Interest Paid by Firm to partners cannot be disallowed U/s. 14A

M/s. Syntholab Chemicals & Research Vs ACIT (ITAT Mumbai)

In this case basic issue to be decided was about the interest payment made by the partnership firm to the partners in light of the provisions of section 14A read with rule 8D of the Rules....

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Section 14A also applies to investment with dividend income held as stock in trade

M/s. Kalyani Barter Vs I .T.O. (ITAT Kolkata)

Assessing Officer to compute the disallowance as per Rule 8D by taking into consideration only those shares, which have yielded dividend income in the year under consideration. ...

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No disallowance U/s. 14A unless Assessee earns exempt Income during relevant previous year

Red Chillies Entertainment Pvt. Ltd. Vs Asstt. Commissioner of Income Tax (ITAT Mumbai)

ITAT followed Delhi High Court in Cheminvest and held that, unless during the relevant previous year, assessee earns any exempt income no disallowance under section 14A r/w rule 8D can be made....

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Rule-8D is not attracted if assessee has voluntarily computed disallowance

M/s Shapoorji Pallonji & Co. Ltd Vs. DCIT (ITAT Mumbai)

Under sub-section (2) of Section 14A of the Act, the Assessing Officer is required to examine the accounts of the assessee and only when he is not satisfied with the correctness of the claim of the assessee in respect of expenditure in relation to exempt income,...

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Sec. 14A No attribution of expense for exempted income earned without employee interference

Pradeep Khanna Vs ACIT (Delhi High Court)

If tax exempted income was earned without interference of any employee but rather through solicitation and advertisement of bank the question of attributing any expenditure cannot arise at all....

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S. 14A cannot be invoked if no regular activity in respect of Investment

M/s Power Grid Corporation of India Ltd. Vs DCIT (ITAT Delhi)

ITAT Held that Section 14A of Income Tax Act,1961 cannot be invoked, where no regular activities were undertaken by the Assessee in respect of the investments to earn exempt income and no change in the investments during the year?...

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Disallowance u/s 14A gets attracted even if a mix of interest bearing & non-bearing funds used to make investments earning exempt income

M/s Thermotech Engineering Vs ACIT (ITAT Pune)

The ITAT bench of Pune in the case of M/s Thermotech Engineering held that where the assessee has earned exempt income and incurred expenditure by way of interest which is not directly attributable to any particular income...

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Section 14A: Consolidating latest Judicial Developments

Ever since the advent of section 14A in the statute, it has evoked squall of controversy. While the purpose of the section was to compute taxable income by whisking away the expenses attributable to exempt income, the tax department always tried to use it for fetching some more fortunes. In this article attempt has been made to look into ...

Read More
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