INCOME TAX ACT, 1961

Section 14A

Disallowance under section 14A - Expenditure incurred on exempted income - Allegation that no corresponding disallowance was made by assessee -

Assessee had earned exempt income during the year and had not made any corresponding disallowance of expenses for earning of the exempt income. Accordingly, after issuing show cause notice to assessee, AO invoked provisions of section 14A of the Act read with rule 8D of the Rules and disallowed a sum comprising of expenses directly relating to earning of exempt income. AO stated that expenses incurred by way of PMS fee to three funds was incurred in order to earn taxable income which was offered to tax. Therefore, same was not liable to be disallowed under section 14A. Held: PMS fee was paid to all three funds and assessee had earned short term capital gains from all these funds. All these expenses were incurred in relation to earning of taxable income and there was some merit in the contentions of assessee that these cannot be disallowed as direct expenses relating to earning of exempt income. Therefore, disallowance made under section 14 was liable to be disallowed.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2013-14

INCOME TAX ACT, 1961

Section 14A

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