Expenditure incurred in respect of exempt income

The Finance Act, 2001 has inserted section 14A in the Income-tax Act, 1961 wherein it was specifically provided that for the purpose of computing the total income, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of total income under the Act. It is also been provided that nothing contained in section 14A shall empower the Assessing Officer (A.O.) either to reassess u/s 147 or pass an order enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee u/s 154 for assessment year (AY) 2001-02 or earlier thereto. This section has been introduced retrospectively in order to clarify and state the position of law that any expenditure relatable to income which does not form part of total income cannot be set off against other taxable income. This section was not introduced with prospective effect, as that would have implied that before the introduction of the said provisions, expenditure incurred to earn exempt income was allowable. However, there is restriction of reopening of past completed assessments, having attained finality as reopening of these past completed assessments on the basis of newly inserted provisions of section 14A is likely to cause hardship to a large number of taxpayers and would result in increasing avoidable litigation. We at Taxmantra.com have the expertise in handling individual taxation, do let us in case you any such issue troubling you. Taxmantra.com provides most hassle free tax return filing/ online return filing experience. Once you have collected, your salary certificate and other documents, we request you to please log in to www.taxmantra.com/ereturns or you can also directly mail at info@taxmantra.com to submit the details. Upon receiving the documents, we would contact you to file your return of income.

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