Opinion Of Eminent Legal Luminaries On Controversial Issues

Whether AO Can Disallow Interest And Depreciation U/s. 14A From Remuneration And Interest From The Firm?

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 AO?
ANSWER: 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.

This proposition has been confirmed by the Mumbai Tribunal in Hoshang D. Nanavati v. ACIT [25 taxmann.Com 141], wherein the Tribunal held that the assessee earned remuneration income as also profit share from the same activity of attending office, it would not be fair to treat all such incidental expenditure only for the purpose of earning remuneration income. Having regard to the smallness of the amount involved it would be justified to allocate these expenses in the same ratio in which these expenses were allocated by the Assessing Officer.

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