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

Meera Textiles Ltd claims that it incurred no expenditure in earning an income that is exempt and does not form part of total income. The Assessing Officer, having regard to the accounts, is not satisfied with this claim. What does the Income-tax Act, 2025 permit the Assessing Officer to do?

Where the Assessing Officer, looking at the accounts, is not satisfied with a claim that no expenditure was incurred for exempt income, section 14(2) lets him determine the expenditure by any method as may be prescribed. The disallowance is then based on that determined amount.

  1. ADisallow the whole of the company's other business expenditure
  2. BDetermine the expenditure in accordance with any method as may be prescribedCorrect
  3. CAccept the claim since the income is exempt
  4. DTreat the exempt income as taxable income of the year

Explanation

Section 14(2)(b) covers dissatisfaction with a claim that no expenditure was incurred. In that case the Assessing Officer determines the expenditure under a prescribed method. He cannot disallow unrelated expenses or convert exempt income into taxable income, and he is not bound to accept the claim.

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