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CMA Intermediate · Direct and Indirect Taxation · Income which does not form part of Total Income

Anil earns Rs 5,00,000 of income that does not form part of his total income. He incurred Rs 40,000 of expenditure in relation to that income. Under section 14 of the Income-tax Act, 2025, what is the treatment of this Rs 40,000 in computing his total income?

The Rs 40,000 is not allowed as a deduction. Section 14(1) of the Income-tax Act, 2025 disallows expenditure incurred in relation to income that does not form part of total income, so it cannot be set against Anil's taxable income.

  1. AAllowed as a deduction from his other income
  2. BAllowed as a deduction only against the exempt income
  3. CNot allowed as a deductionCorrect
  4. DAllowed only if the Assessing Officer accepts the claim

Explanation

Section 14(1) says that, irrespective of anything contrary in the Act, no deduction is allowed for expenditure incurred in relation to income not forming part of total income. The Assessing Officer's power in section 14(2) is to determine the expenditure by a prescribed method when not satisfied with the claim. It does not make the expenditure deductible.

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