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

Under Section 14(2) of the Income-tax Act, 2025, when may the Assessing Officer determine the expenditure relating to exempt income by a prescribed method?

The Assessing Officer may use a prescribed method when, looking at the accounts, he is not satisfied with the correctness of the expenditure claimed, or with the assessee's claim that no expenditure was incurred, in relation to income not forming part of total income.

  1. AWhenever the assessee has exempt income of any amount
  2. BOnly when the assessee has filed the return after the due date
  3. COnly when the exempt income exceeds the taxable income
  4. DWhen, having regard to the accounts, he is not satisfied with the correctness of the expenditure claim or with the claim that no expenditure was incurredCorrect

Explanation

Section 14(2) applies where the Assessing Officer, having regard to the accounts, is not satisfied with the correctness of the claimed expenditure or with the claim that no expenditure has been incurred. He then uses a prescribed method. The existence of exempt income alone, or a late return, does not trigger it.

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