Disallowance under Section 14A of Income TAx Act, 1961
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Income Tax : The issue was whether exempt dividend income could be taxed by overriding Rule 8D. The ITAT held that additions beyond the Section...
Income Tax : The Tribunal clarified that disallowance under Section 14A is not warranted when sufficient interest-free own funds are available,...
Income Tax : The ruling confirms that notional disallowances under Section 14A cannot be added while computing book profits under the MAT regim...
Income Tax : Section 14A disallows expenses related to tax-exempt income. Rule 8D provides the formula, ensuring only taxable-income-related ex...
Income Tax : Bombay Chartered Accountants' Society has made a Representation on 'Suggestions for Amendments in the Income Tax Act', on 24th May...
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 whethe...
Income Tax : 1. IMPLEMENTATION OF IND-AS AND THEIR IMPACT ON TAXABLE INCOME IND-AS (Indian version of IFRS) accounting standards are being impl...
Income Tax : Amendments to Section 14A to provide that (i) dividend received after suffering dividend-distribution tax and share income from fi...
Income Tax : As earlier intimated to you, Writ Petition bearing No. 50 of 2010 (Indian Exporters Grievances Forum & Other vs. CIT) challenging ...
Income Tax : The ITAT Pune upheld the deduction under Section 10AA after finding that the Assessing Officer had not established that the SEZ un...
Income Tax : The ITAT Mumbai held that Explanation 1 to Section 37(1) could not apply in the absence of any finding by the competent authority ...
Income Tax : The Tribunal held that Rule 11UA gives the assessee the exclusive option to choose the valuation method for unquoted shares. While...
Income Tax : The ITAT Mumbai held that ESOP discount is an allowable deduction under Section 37(1), observing that the pendency of an SLP again...
Income Tax : Expenditure of ₹4.49 crore incurred on maintenance dredging for removal of natural siltation and restoration of the existing ope...
Income Tax : 2) The expenditure in relation to income which does not form part of the total income shall be the aggregate of following amounts,...
Income Tax : Circular No. 5/2014-Income Tax Central Board of Direct Taxes, in exercise of its powers under section 119 of the Act hereby clari...
Income Tax : INCOME TAX NOTIFICATION NO-45/2008, DT: March 24, 2008 Method for determining amount of expenditure in relation to income not incl...
Income Tax : The provisions of Sections 144-A and 144-B of the Income-tax Act have come into force with effect from 1st January 1976. Instructi...
It was held in this case that where it is found that for earning exempted income no expenditure has been incurred, disallowance under section 14A cannot stand. In view of the finding of the Tribunal, it is clear that the expenditure on interest was set-off against the income from interest and the investment in the share and funds was out of the dividend proceeds. In view of this finding of fact, disallowance under section 14A was not sustainable.
Section 14A was introduced in the Income Tax Act, 1961 by the Finance Act 2001 with retrospective effect from 1st April 1962. The intent of introducing this section was reiteration of the well settled legal principle that when an assessee incurs any expenditure in relation to income which is not liable to tax under the Act, he would ideally not be allowed the benefit of claiming such expenditure. The need for introduction of this section had arisen to negate the decision of Supreme Court in Rajasthan State Warehousing Corporation vs. CIT [2000] ITR 450.
As per well settled law and also according to canons of taxation only that expenditure which is relatable to taxable income should be deducted in computing the total income. Expenditure which has a bearing on exempt income should not be considered in the computation of total income as otherwise this would result in double advantage to the assessee.
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.
The Bombay High Court ruled that once the taxpayer’s submissions with respect to section 14A was accepted by a tax officer, the Tribunal cannot send back the same matter for the tax officer’s re¬consideration. Recently, the Bombay High Court in the case of Topstar Mercantile Pvt. Ltd v. ACIT (2009-TIOL-458-HC-MUM-IT) has held that the Income-tax Appellate Tribunal (the Tribunal) was not justified in sending back the matter to Assessing Officer (AO) to consider the applicability of section 14A of the Income Tax Act, 1961 (Act) after applying the ratio of the decision in the case of ITO v. Daga Capital Management Pvt. Ltd [2008] 312 ITR (SB) (Mum) since the submissions made by the taxpayer in this regard was accepted by the tax officer during the assessment proceedings.
Whether for the purpose of disallowance under Section 14A of the Act:-(a) Rule 8D is to be considered as retrospective; Whether before application of Rule 8D the Assessing Officer should give a holding that he is not satisfied for the basis or quantum of expenses disallowed by the Assessee; b) Whether disallowance is to be made if Investment is held as stock-in-trade?
Special Bench of the Income Tax Appellate Tribunal, New Delhi in the case of Cheminvest Ltd. (ITA Nos.87Del//2008, 4788/Del/2007 and 233/Ahd/ 2006) holds that expenditure relating to exempt income to be disallowed even if assessee has not earned any tax-free income.
Special Bench of the Income Tax Appellate Tribunal, New Delhi holds that expenditure relating to exempt income to be disallowed even if assessee has not earned any tax-free income.
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 statements of companies.
A partnership firm is a separate entity than that of its partners under the Income-tax Act and therefore, partners vis-à-vis partnership firm would stand on the same footing of shareholders vis-à-vis company; accordingly , income charged in the hands of partnership firm cannot be treated as being a non-exempt income in the hands of a partner of such firm and, therefore, provisions of section 14A would be applicable in computing the total income of such partner in respect of his share in the profits of such firm.
