Section 14A

Section 14A – Surplus own funds, no disallowance U/s. 14A? Borrowed Money Vs. Own Money

Income Tax - The people of the largest democracy in India, expected in the Union Budget 2018 to introduce some amendments to section 14A of the Income Tax Act, 1961 (Act), to reduce tax litigations on account of section 14A and to bring in certainty and clarity in the disallowance under Section 14A....

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MAThematical puzzles!

Income Tax - Minimum Alternate Tax, though on the statute since practically 3 decades now, has always been a subject matter of controversy. Even after all the amendments to it over the years, most recently to align it with the Ind-AS provisions, there is still room for filling in certain gaps. This article seeks to raise certain concerns, which, hopef...

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Rule 8D read with Sec 14A gets a Twist

Income Tax - Finance Act 2016 amended the existing Rule 8D of the Income Tax Rules. Before coming to the intricacies of the amended Rule, which have been put in effect from 2nd June, 2016, it would be important to cover a few basics of the section per se and the erstwhile methodology....

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AO cannot straight away apply rule 8D, without considering claim of assessee U/s 14A(2)

Income Tax - It has been observed that for the purpose of disallowance of expenditure under section 14A of the Income-Tax Act, 1961 (the Act), in respect of income exempt from tax, the Assessing Officers (AOs) have been following a totally erroneous method of straight away applying rule 8D of the Income-Tax Rules, 1962 (the Rules), without considering...

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Disallowance u/s 14A on exempt investment

Income Tax - i. There is no interest expenses relatable to exempt investment. Assessee has made investment in the heads of tax free income. Investment in equity shares, insurance policies etc. are related to earlier years and were invested from the own capital funds. Therefore that investment is not related to this year. Hence, provisions of sec 14A [...

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Stop Mechanical disallowance of expenditure u/s 14A r.w. Rule 8D: ICAI

Income Tax - The mechanical disallowance u/s 14A r.w. Rule 8D is also being added to the book profit by the AO irrespective of the fact whether assessee has actually debited any such expenditure in its P&L Account which is against the pronouncements given by various Judicial authorities in the recent past....

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Easwar Committee Recommendations For Income Tax Reforms Through Administrative Instructions

Income Tax - 1. IMPLEMENTATION OF IND-AS AND THEIR IMPACT ON TAXABLE INCOME IND-AS (Indian version of IFRS) accounting standards are being implemented with effect from previous year commencing on 1st April, 2015 based on fair value, permitting recognition of unrealised income and anticipated unrealised losses and various other implications on book pro...

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Simplify Section 14A to remove ambiguity

Income Tax - Amendments to Section 14A to provide that (i) dividend received after suffering dividend-distribution tax and share income from firm suffering tax in the firm’s hands will not be treated as exempt income and no expenditure will be disallowed as relatable to them; (ii) expenditure disallowed shall not exceed the amount claimed. Recom...

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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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High court will hear Writ Petition challenging the constitutional validity of Rule 8D and matters related to interpretation of section 14A

Income Tax - 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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Shares held as stock-in-trade do not attract dis allowance u/s 14A

ACIT Vs. M/s Safe Enterprises (ITAT Mumbai) - No dis allowance u/s 14A is called for in a case where the shares are held as stock-in-trade as held in India Advantage Securities Ltd. (supra), CCI Ltd. v. JCIT (2012) 20 taxmann.com 196 (Karn.), PCIT v. State Bank of Patiala (2017) 78 taxmann.com 3 (P& H) and CIT v. G.K.K. Capital Markets (P.) Ltd...

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Consultancy charges Incurred for making investment are allowable

Pr. CIT Vs. Sintex Industries Ltd. (Gujarat High Court) - Where dis allowance was made by revenue under section 14A in respect of interest and administrative expenses, it was made clear that where assessee had its own surplus fund, then no question of any estimation of expenditure under rule 8D would arise. Thus, revenue was not justified in disallowing in...

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For invoking section 14A r.w. rule 8D, AO had to mandatorily record his satisfaction

DCB Bank Ltd. Vs Asstt. CIT (ITAT Mumbai) - At the outset, the learned Authorised Representative submitted that the issue raised by the revenue in second ground of appeal stands covered by the decision of the co-ordinate Bench in assessee’s own case in ITA No. 615/Mum/2014 (AY-2010-11) order dated 4-11-2015 ...

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No Disallowance U/s. 14A on strategic investments out of Commercial expediency

Dy. CIT Vs. Alpha G. Corp Development Ltd. (ITAT Delhi) - Where assessee had made investment in subsidiary companies not to earn tax free income but out of commercial expediency, no dis allowance under section 14A was called for....

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Rule 8D of Income Tax Rules is Prospective & cannot be applied to AY prior to 2008-09

Commissioner of Income Tax Vs M/s Essar Telehoding Ltd. (Supreme Court of India) - CIT Vs M/s Essar Telehoding Ltd. (Supreme Court of India) Applying the principles of statutory interpretation for interpreting retrospectivity of a fiscal statute and looking into the nature and purpose of sub­section (2) and sub­section (3) of Section 14A as well as purpose and intent of Rule 8D ...

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Section 14A disallowance cannot exceed total expense: CBDT

Notification No. 43/2016-Income Tax - (02/06/2016) - 2) The expenditure in relation to income which does not form part of the total income shall be the aggregate of following amounts, namely:- (i) the amount of expenditure directly relating to income which does not form part of total income; and (ii) an amount equal to one per cent of the annual aver...

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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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Proceedings U/s. 144A & 144B of Income Tax Act, 1961- Procedural Instructions

DOMS-CIRCULAR NO. 11 - (31/12/1977) - The provisions of Sections 144-A and 144-B of the Income-tax Act have come into force with effect from 1st January 1976. Instructions explaining the legal provisions contained in these sections have been issued already in Board’s Instruction No.907, dated the 24th December 1975. The following furt...

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Recent Posts in "Section 14A"

Shares held as stock-in-trade do not attract dis allowance u/s 14A

ACIT Vs. M/s Safe Enterprises (ITAT Mumbai)

No dis allowance u/s 14A is called for in a case where the shares are held as stock-in-trade as held in India Advantage Securities Ltd. (supra), CCI Ltd. v. JCIT (2012) 20 taxmann.com 196 (Karn.), PCIT v. State Bank of Patiala (2017) 78 taxmann.com 3 (P& H) and CIT v. G.K.K. Capital Markets (P.) Ltd. (2017) 78 taxmann.com 341 (Cal.)....

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Consultancy charges Incurred for making investment are allowable

Pr. CIT Vs. Sintex Industries Ltd. (Gujarat High Court)

Where dis allowance was made by revenue under section 14A in respect of interest and administrative expenses, it was made clear that where assessee had its own surplus fund, then no question of any estimation of expenditure under rule 8D would arise. Thus, revenue was not justified in disallowing interest and administrative expenses, when...

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For invoking section 14A r.w. rule 8D, AO had to mandatorily record his satisfaction

DCB Bank Ltd. Vs Asstt. CIT (ITAT Mumbai)

At the outset, the learned Authorised Representative submitted that the issue raised by the revenue in second ground of appeal stands covered by the decision of the co-ordinate Bench in assessee’s own case in ITA No. 615/Mum/2014 (AY-2010-11) order dated 4-11-2015 ...

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No Disallowance U/s. 14A on strategic investments out of Commercial expediency

Dy. CIT Vs. Alpha G. Corp Development Ltd. (ITAT Delhi)

Where assessee had made investment in subsidiary companies not to earn tax free income but out of commercial expediency, no dis allowance under section 14A was called for....

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Rule 8D of Income Tax Rules is Prospective & cannot be applied to AY prior to 2008-09

Commissioner of Income Tax Vs M/s Essar Telehoding Ltd. (Supreme Court of India)

CIT Vs M/s Essar Telehoding Ltd. (Supreme Court of India) Applying the principles of statutory interpretation for interpreting retrospectivity of a fiscal statute and looking into the nature and purpose of sub­section (2) and sub­section (3) of Section 14A as well as purpose and intent of Rule 8D coupled with the explanatory notes in th...

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Max opp Investment Ltd (SC)- Section 14A – An Analysis

Max opp Investment Ltd. Vs. CIT (Supreme Court of India)

Supreme Court (SC) Ruling - Whether the expenditure incurred (including interest paid on funds borrowed), while purchasing the shares/ stocks of a company for the purpose of gaining control over the investee company or as 'stock-in-trade' (i.e. as a business activity) and not as investment to earn dividends, can be treated as expenditure ...

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Sec. 14A – End of controversy relating to strategic investments & stock-in-trade

Max opp Investment Ltd Vs. CIT (Supreme Court of India)

In case of group of companies, normally a company hold shares in various subsidiaries / group companies. The dividend paid by these group companies is exempt in the hands of the parent company under section 10(34) of the Income-tax Act, 1961 (Act). ...

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No disallowance U/s. 14A in absence of expenditure to earn exempt income

M/s. Varsha Corporation Ltd. Vs. Dy. Commissioner of Income Tax (ITAT Mumbai)

M/s. Varsha Corporation Ltd. Vs. Dy. CIT (ITAT Mumbai) In the case under consideration, in the computation of income,the assessee had not claimed any exempt income. The expenditure claimed by it in the profit and loss account have not been shown to have been incurred for earning any exempt income during the year under consideration. [&hel...

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No Dis allowance U/s. 14A if no exempt income earned during the year

DCIT Vs. Aksh Optifibre Ltd. (ITAT Delhi)

Where assessee had not earned any tax-free income, then, corresponding expenditure also could not be worked out for dis allowance. ...

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Amount disallowed u/s 14A cannot be added to arrive at book profit for MAT Calculation

CIT Vs. Bengal Finance & Investments Pvt. Ltd (Bombay High Court)

ribunal followed its decision in M/s. Essar Teleholdings Ltd. v/s. DCIT to held that an amount disallowed under Section 14­A of the Act cannot be added to arrive at book profit for purposes of Section 115JB of the Act....

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