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CS Executive · Tax Laws and Practice · Incomes which do not form part of Total Income

Anand Ltd claimed that it incurred no expenditure in earning exempt income, but the Assessing Officer, having regard to the accounts, is not satisfied with that claim. What does section 14 of the Income-tax Act, 2025 empower the Assessing Officer to do?

Under section 14(2), if the Assessing Officer is not satisfied with the claimed expenditure, or with the claim that none was incurred, relating to income outside total income, he determines the expenditure by a prescribed method. The exempt income itself is not taxed by this step.

  1. ADetermine the expenditure in accordance with any method as may be prescribedCorrect
  2. BTreat the entire exempt income as taxable under section 11(2)
  3. CDisallow the exempt income itself and add it to business income
  4. DRefer the matter to the Central Government to fix a flat percentage

Explanation

Section 14(2) applies where the Assessing Officer is not satisfied with the correctness of the expenditure claim or with the claim that no expenditure was incurred. He then determines the expenditure under a prescribed method. Taxing the exempt income itself is not the remedy; the disallowance relates only to expenditure.

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