What is Section 14A of Income Tax Act?
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Section 14A provides for disallowance of deduction in respect of expenditure incurred by an assessee to earn tax-exempt income. The controversy is whether such disallowance will be made even if the assessee does not earn any exempt income.
What is SEC 14A disallowance?
Section 14A is a disallowance provision. This section provides that while computing the total income of any assessee, no deduction will be permitted in respect of any expense incurred in relation to any income which is exempt from income tax. Position prior to the introduction of section 14A.
Can 14A disallowance exceed exempt income?
Marg Limited v. CIT (supra), it is clear that the disallowance u/s 14A of the I.T. Act cannot exceed the exempt income earned during the relevant assessment year irrespective whether larger amount was disallowed by the assessee u/s 14A of the I.T. Act while filing the return of income.
What is income how gross total income is computed under section 14?
As the name suggests Gross Total Income is the aggregate of all the income earned by you during a specified period. According to Section 14 of the Income Tax Act 1961, the income of a person or an assessee can be categorised under these five heads, Income from Salaries. Income from House Property.
Is Rule 8D mandatory?
A plain reading of rule 8D would show that once the assessing officer was not satisfied with the correctness of the claim of expenditure in relation to exempt income then the disallowance has to be compulsorily computed as per the provisions of rule 8D. This is mandatory.
Is demat charges disallowed under which section?
It was further explained that demat realization charges and the expenses for holding the investments in a particular form and not for earning of income, which can be considered for disallowance under Section 14A.
What is section 32AC of Income Tax Act?
In order to encourage the companies engaged in the business of manufacture or production of an article or thing to invest substantial amount in acquisition and installation of new plant and machinery, Finance Act, 2013 inserted section 32AC in the Act to provide that where an assessee, being a company, is engaged in …
What is Section 40A 2 )( B of Income Tax Act?
Section 40A(2) provides power to the Income Tax Officer that in case any expenditure has been incurred and the payment has been made or is to be made to certain specified persons and he is of the opinion that such expenditure is excessive or unreasonable with regard to the fair market value of the goods, services or …
What is the difference between gross and total income?
Gross Total Income is the aggregate income of a person, arrived after adding up income from all the five sources. Total Income refers to that income of the assessee on which the tax liability is calculated. Tax is not levied on this income.
What are the deduction from gross total income?
The deduction for self-employed individual would be 20% of his/her Gross Total Income. Section 80CCD(1B) provides for additional deduction up to Rs. 50,000 for the amount that they deposit in the National Pension Scheme. under section 80CCD in the hands of the individual.
What is Section 40a of Income Tax Act?
– For the removal of doubts, it is hereby declared that where any provision made by the assessee for the payment of gratuity to his employees on their retirement or on termination of their employment for any reason has been allowed as a deduction in computing the income of the assessee for any assessment year, any sum …
When was Rule 8D amended?
2 June 2016
Amended rule 8D is applicable w.e.f. 2 June 2016 which inter-alia provides for disallowance of 1% of the annual average of the monthly average of the opening & closing balances of investment, income from which does not or shall not form part of total income.
What is Section 14a of the Income-Tax Act?
If we look at the language of section 14A of the Income-tax Act, it provides for disallowance of an expenditure incurred in relation to income which does not form part of total income.
What cannot be denied under section 14A (1) of the Act?
In the decision in the case of Godrej & Boyce ( supra) (para 36), the Hon’ble Court has observed that “ what cannot be denied is that the requirement for attracting the provisions of Section 14A (1) of the Act is proof of the fact that the expenditure sought to be disallowed/deducted had actually been incurred in earning the dividend income.
Why was Section 14a of the Finance Act 2006 amended?
There was another amendment by the Finance Act, 2006 to section 14A which enlarged the scope of applicability of section 14A. Previously introduced section had not generated expected revenue or compliance up to the mark. This was the basic reason for this amendment. The newly inserted section w.e.f. 1-4-2007 reads as under:— ’14A.
Can disallowance be attracted under Section 14a without exempt income?
Though there had been countless litigation on this issue, it seems to have been settled by various judgements of high courts that disallowance cannot be attracted under Section 14A in the absence of exempt income. Does exempt income for the purpose of this section include profit-linked deduction under Chapter VI-A?