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Clarification in respect of disallowance under section 14A in absence of any exempt income during an assessment year 1. Section 14A of the Act provides that no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income that does not form part of the total
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FAQ :
Section 14A states that no deduction can be claimed for expenses incurred by an assessee in relation to income that is exempt from tax.
The dispute was whether disallowance under Section 14A could be made even if the assessee did not earn any exempt income during a particular assessment year.
It is proposed to clarify that Section 14A will apply and be deemed to have always applied even if exempt income has not accrued, arisen, or been received, as long as expenditure was incurred in relation to such exempt income.
This amendment will take effect from 1st April 2022 and will apply to assessment year 2022-23 and subsequent years.
The clarification is intended to make the legislative intent clear and prevent misinterpretations by courts that might allow deductions for expenses related to exempt income when none was earned in a year.
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