section 14a

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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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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Expenditure incurred in relation to income not includible in total income

Income Tax - As per section 14A, expenditure incurred in relation to any exempt income is not allowed as deduction. However, if the Assessing Officer is not satisfied with the correctness of the claim of the assessee in respect of expenditure in relation to exempt income, or the claim made by the assessee that no expenditure has been incurred in relat...

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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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Cost accountants may not be treated at par with chartered Accountants

Income Tax - Officials at Icwai have been lobbying the government to include cost accountants under the definition accountant as defined in the subsection 2 of Section 288 of the Income-tax Act. The finance ministry has ignored calls by cost accountants that they be treated at par with chartered accountants and be allowed to sign off on the financial ...

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Rule 8D Disallowance cannot be made by ‘Change of Opinion’

Samvardhana Motherson International Ltd Vs. Assistant Commissioner Of Income Tax & Anr. (Delhi High Court) - Rule 8D is triggered only in a case where the AO is not satisfied with the deduction made by the Assessee. The reasons to believe assume and are predicated on the belief that the AO should not have accepted the Petitioner’s deduction as explained and justified, albeit should have applied Rule 8D. ...

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AO cannot disallow expense U/s. 14A without recording his dis-satisfaction

Pr. Commissioner of Income­Tax­ Vs M/s. Reliance Capital Asset Management Ltd. (Bombay High Court) - Whether on the facts and in the circumstances of the case, the Hon. Income Tax Appellate Tribunal was justified in restricting the disallowance u/s 14A to Rs.3,50,000/­ as against Rs.1,46,78,090/­ made by the Assessing Officer u/s 14A r.w. Rule 8D without appreciating the fact that for invoking di...

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No specific format is provided U/s. 14A for recording satisfaction

G.E India Exports Pvt. Ltd. (Formerly GE Power Controls India (P) Ltd. Vs. Dy. CIT (ITAT Bangalore) - Since, no specific format is provided under the Act for recording satisfaction for making dis allowance under section 14A, AO was not required to give detailed reasons for invocation of rule 8D(2) in view of the fact that assessee failed to discharge its primary onus of proving nexus between interes...

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No Sec. 14A disallowance for shares held as stock in trade

D.C.I.T. Vs M/s. Kredent Brokerage Services (ITAT Kolkata) - Calcutta High Court in the case of CIT Vs GKK Capital Markets (P)Ltd 392 ITR 196 (Calcutta) has taken a view that the shares held as stock in trade and the expenses in relation to shares so held cannot be disallowed u/s 14A of the Act. In view of the aforesaid decision and the decision of the ITAT i...

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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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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"

Rule 8D Disallowance cannot be made by ‘Change of Opinion’

Samvardhana Motherson International Ltd Vs. Assistant Commissioner Of Income Tax & Anr. (Delhi High Court)

Rule 8D is triggered only in a case where the AO is not satisfied with the deduction made by the Assessee. The reasons to believe assume and are predicated on the belief that the AO should not have accepted the Petitioner’s deduction as explained and justified, albeit should have applied Rule 8D. Thus, the view and opinion formed by the...

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AO cannot disallow expense U/s. 14A without recording his dis-satisfaction

Pr. Commissioner of Income­Tax­ Vs M/s. Reliance Capital Asset Management Ltd. (Bombay High Court)

Whether on the facts and in the circumstances of the case, the Hon. Income Tax Appellate Tribunal was justified in restricting the disallowance u/s 14A to Rs.3,50,000/­ as against Rs.1,46,78,090/­ made by the Assessing Officer u/s 14A r.w. Rule 8D without appreciating the fact that for invoking disallowance u/s 14A, it is not material t...

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No specific format is provided U/s. 14A for recording satisfaction

G.E India Exports Pvt. Ltd. (Formerly GE Power Controls India (P) Ltd. Vs. Dy. CIT (ITAT Bangalore)

Since, no specific format is provided under the Act for recording satisfaction for making dis allowance under section 14A, AO was not required to give detailed reasons for invocation of rule 8D(2) in view of the fact that assessee failed to discharge its primary onus of proving nexus between interest-free funds and the investments yieldin...

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No Sec. 14A disallowance for shares held as stock in trade

D.C.I.T. Vs M/s. Kredent Brokerage Services (ITAT Kolkata)

Calcutta High Court in the case of CIT Vs GKK Capital Markets (P)Ltd 392 ITR 196 (Calcutta) has taken a view that the shares held as stock in trade and the expenses in relation to shares so held cannot be disallowed u/s 14A of the Act. In view of the aforesaid decision and the decision of the ITAT in assessee’s own case, we are of the v...

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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 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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