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Section 14a and rule 8d

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(Querist)
30 December 2015 Whether provisions of S.14A are applicable on income of the partner as a share in profits of partnership firm which is exempted u/s. 10(2A) of the Income Tax Act.
At the same time, whether working as per Rule 8D(2)(iii) can apply for determining quantum of income which does not form part of total income ?
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CA PARAS BAFNA

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CA PARAS BAFNA (Expert)
30 December 2015 Section 14A can be made applicable by the AO in specific circumstances only.
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When the partner deploys his own funds or interest free funds in total are more than the investment in the firm , then 14A can not be applied.
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Rule 8D(2)(iii) is applied for determining the disallowable expenditure in relation to the investment generating exempt income.
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It may also be argued, on the basis of facts of the case, that interest and salary are received by the partner and the same are forming part of the taxable income and such Section 14A may not be applied.
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CA Aagam Shah

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CA Aagam Shah (Querist)
04 January 2016 Thank you Sir gor your guidance.
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