04 October 2016
QUERY U/S 14A OF THE INCOMETAX ACT A Joint a firm as a partner. He invest a capital has own funds Rs.10 Lakhs.
He borrow funds to the extent of Rs.20 Lakhs and invests in the firm towards capital. He is eligible for interest on capital investment and remuneration as a working capital. Balance his shown in the firm is exempt u/s 10(2A).
The AO propose to impose the provision of Sec 14A as he is a shown in the profit of the firm u/s 10(2A) as he has invested part of capital the borrow funds. Whether his achieved is correct.?
07 October 2016
Yes, the assessing officer's contention is correct and sec 14A will be applicable. However, the disallowance shall be divided proportionately to taxable and exempt income. Taxable income being interest on partners capital and remuneration to partners and exempt income being share of profit
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