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Sec 14A

Jyoti Gupta (CA student) (71 Points)

15 September 2009

Dear colleagues

If there is no direct nexus between exempt income earned & the interest expenses ,then whether sec 14A read with rule 8D is applied or not ??

Please reply as earliest

thanking you

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3 Replies

Ashish M (Chartered Accountant) (2731 Points)
Replied 15 September 2009

Rule 8DD(2) (ii)/(iii) specifies that it shall be covered into computation whether their is any direct nexus between the two or not...............

IT HAS TO BE INCLUDED INTO COMPUTATION...................

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Manmohan ACA, CS (Chartered Accountant ) (14243 Points)
Replied 15 September 2009

No since there is no nexus between exempted income and interest paid/ accrued - it indicates that all interest has been incurred for earning taxable income and hence fully allowed u/s 36(1)(iii)

Read

section 14A as follow

[(1)] For the purposes of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act:]

[Provided that nothing contained in this section shall empower the Assessing Officer either to reassess under section 147 or pass an order enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee under section 154, for any assessment year beginning on or before the 1st day of April, 2001.]

Rajeev (www.rkmco.com) (985 Points)
Replied 20 September 2009

if there is no connection between exempt interest and interest claimed as expense , the crux of 14A is defeated and not applicable provided it is proved beyond reasonable doubt that there is no connection .