S. 14A disallowance can be made with regard to partner’s share of profits
Nov 5, 2009 Income Tax Case Laws
The assessee, a partner in a firm, received ‘share of profit’ and ‘salary’ from the firm. While the ‘share of profit’ was exempt u/s 10(2A), the ‘salary’ was taxable as business income u/s 28 (v). The assessee claimed deduction for business expenditure incurred by him. The AO held that as the assessee had exempt income, s. 14A applied and a part of the expenditure had to be disallowed. This was confirmed by the CIT (A). Before the Tribunal, the assessee argued that as a partnership firm was merely a compendium of partners having no independent legal personality, the share of profit was not an exempt income in the hands of partner as the firm had paid tax thereon. HELD rejecting the plea:
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Tags: 14a, business income, daga, dharmasingh popat vs. acit (itat mumbai), partnership firm, separate entities