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Disallowance of expenses relating to agri income

Shikha Sharma (Chartered Accountant) (311 Points)

04 March 2010

Hi, an assessee has shown agricultural income in his return of Rs. 4,50,000 and business income of Rs. 2,50,000, and has incurred expense towards agricultural income of Rs. 1,00,000.

He has not deducted expense towards agricultural income from busines income as per Sec 14A. But the AO assesses the agricultural expense to be Rs. 50,000, and disallows the remaining expense of Rs. 50,000 and adds to business income. Is the claim of the AO be accepted?

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9 Replies

CA Dhiraj Ramchandani (CA, M. com) (10823 Points)
Replied 04 March 2010

No.. not acceptable.. Rs. 50000 should be added to agriculture income only

Vivek Angrish (Manager Finance & Accounts) (232 Points)
Replied 04 March 2010

Yes, Mr. Dhiraj is right, but in order to get back the claim, the assesse have to maintain the seperate accounts for business income and agricultural income,

Rachit (Analyst) (913 Points)
Replied 04 March 2010

The stand taken by AO is not acceptable. File an appeal before the CIT (A). Also file a rectification application u/s. 154 before AO.

Also Refer Rule 7

CA Priya (CS Final) (1049 Points)
Replied 04 March 2010

The AO is wrong bec Sec14A says the expense incurred wrto agri income shall not be allowed in computing the taxable business income....... Since here the assesee has not considered Rs.50000 it has to be added with the Agri income and not business income..........

Poornima (Search on.... for knowledge) (129 Points)
Replied 05 March 2010

Originally posted by : D н ! я σ ĵ
	No.. not acceptable.. Rs. 50000 should be added to agriculture income only

Shikha Sharma (Chartered Accountant) (311 Points)
Replied 05 March 2010

Thanks a lot friends...

saranraj (CA FINAL) (419 Points)
Replied 05 March 2010

CLAIM OF AO IS ACCEPTABLE. Only expenses that are attributable for getting agricultural income is allowed to be deducted from agricultural income so derived.

saranraj (CA FINAL) (419 Points)
Replied 05 March 2010

EXPENSES NOT ATTRIBUTABLE FOR PROCURING AGRICULTURAL INCOME HAS TO BE ADDED BACK TO BUSINESS INCOME IF HE HAS NO OTHER INCOME EXCEPT BUSINESS AND AGRICULTURAL. IF HE HAD SPENT FOR ANY EXPENSE, IT MAY BE EITHER FOR HIS PERSONAL PURPOSE, BUSINESS PURPOSE OR AGRICULTURAL PURPOSE. IT HAS TO SEEN THAT WHERE FROM THE MONEY HAS BEEN SPENT. IS THE PAYMENT IS MADE FROM BUSINESS OR OUT OF HIS PERSONAL SOURCES?

IF IT IS FROM PERSONAL HIS PERSONAL ACCOUNT- AO's DECISION IS WRONG

IF IT IS FROM BUSINESS CURRENT ACCOUNT- NATURE OF EXPENSE TO BE VERIFIED WHETHER IT IS FOR PROCURING BUSINESS INCOME OR AGRICULTURAL INCOME. IF EXPENSE IF FOR PROCURING BUSINESS INCOME, WHAT AO DID IS RIGHT. IF THE EXPENSE IS FOR AGRICULTURAL PURPOSE, AO'S DECISION IS WRONG.

THE KEY FACTOR HERE IS

1. WHERE FROM THE MONEY HAS BEEN SPENT?

2. WHETHER THE AMOUNT SO DISALLOWED IS FULLY ATTRIBUTABLE FOR PROCURING AGRICULTURAL INCOME?

CA CMA Amarnath Nuthalapati (Chartered Accountant) (81 Points)
Replied 05 March 2010

Exempted income and Expenditure are not included in Regular income. If any noncompliance in respect of Exempted income and Expenditure then it will be effected to the same and not to the Regular income. Hence the Stand point of AO is not correct.