Search Results For: exempt income


QUERY: A NRI Tax Payer in 2003, booked a Flat in Kolkata, basically for investment purposes.

A Three Room Flat with specific Flat No. 32G, was allotted to him in May 2004. He went on paying the Price as per the Agreement, aggregating to Rs. 34,62,659/-, according to the progress of the Building Construction.

In 2006, he decided to return to Kolkata permanently and has been looking for a Residential Flat for his residence. He got a bigger 4 Bed Room Flat No. 31J in the same building. He made an initial payments of Rs. 8,35,200/- to the allottee of the said Flat No. 31J, as commitment money, with a clear understanding that, on his return to Kolkata, he will sell the Flat No. 32G allotted to him and pay the balance amount of Rs. 67,00,000/-.

He returned to Kolkata permanently on 31-1.2008 and sold the flat allotted to him on 3-6-2009 for net Sale Price of Rs. 67,00,000/- and paid for the bigger Flat No. 31J, the balance of the agreed amount.

He took the Physical Possession of the bigger Flat No. 31J on 13-11-2008.

Now, the question is, whether the Capital Gain on Sale of the Flat No. 32G, allotted to him in the Year 2004, after FIVE Years of the date of allotment would be considered as a Long Term Capital Gains and the said Capital Gains on an Investment for Residential Flat within one year from the date of sale will be an exempted income in terms of the Provisions contained in section 54 and/or section 54F of the Income-tax Act, 1961.
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A right in Flat No. 32G was acquired in May, 2004, which was under construction. For which he made payments in instalments. The said right was sold by him on 3-6-2009 without taking the possession of the said flat.

QUERY: What is the implication of section 14A vis-a vis holding of shares, if

(i) No tax free dividend is received at all during the year.

(ii) Shares are held as stock-in-trade

(iii) Shares are held solely and exclusively as a promoter and for controlling interest.

(iv) The assessee had obtained loan but the funds are mixed.
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(i) In Shankar Chemicals Works vs. DCIT [47 SOT 121], the Ahmedabad Tribunal has held that, if any expenditure has been incurred for earning exempt income, same has to be disallowed even if there is no actual earning of any exempt income. If interest bearing borrowed funds are utilised for purpose of investment in shares and there is no receipt of dividend income or if there is only meagre dividend income, even then whole amount of interest expenditure incurred for this purpose will be subject to disallowance under section 14A because the same has been incurred for earning exempt income.

QUERY: Mr. S. is holding certain shares on investment account as well as stock-in-trade. For A.Y. 2013-14, he has not received any dividend income on the shares held as investment.

A. The Assessing Officer wants to invoke section 14A read with Rule 8D with respect to all the shares. Mr. S. wants to know:

(i) Whether section 14A applies when the shares are held as stock-in-trade?

(ii) Whether section 14A applies when no tax free dividend income is received during the year?

B. The Dept. now intend to apply/follow the Circular No. 5/2014 dated February 11, 2014 issued by the CBDT, as per which the disallowance u/s. 14A is required to be made even in absence of any exempt income received during the year.
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• As per ITO v. Daga Capital Management Pvt. Ltd [312 ITR (AT) Mumbai (SB)], section 14A is applicable to both i.e. when the shares are held as stock-in-trade and investment.

• In Godrej and Boyce Mfg Co. Ltd. v. DCIT [328 ITR 81] the Bombay High Court has held that the expression

QUERY: An assessee is in receipt of interest & remuneration income from various partnership firms and claims interest & depreciation as expenditure from such income. Can a disallowance u/s. 14A be made by A.O.?
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If the assessee has borrowed the amount and invested in the firm, where from he receives, remuneration and share of profit, then, the Assessing Officer is justified in making disallowance u/s. 14A proportionately.