Q & A :Share of loss of a partnership firm & Section 14A of I.T. Rule 8D

[P.D.RUNGTA]

Query: Share of loss of a partnership firm

Dear Sirs, Please guide me if " Share of loss of a partnership firm can be adjusted against the other business income in the books of the partner." Or "the loss of the firm can only be adjusted against the income of the firm in next year's profit" Thanks & Regards R. Kumar

Reply:

Dear Mr. Kumar, Sub: Setoff of losses arising out of exempt income Share of loss from a partnership firm cannot be adjusted against other business income of the partner nor can the said loss be carried forward for setoff against the share of profit in the subsequent year. The reason is that the share of profit from a partnership firm is exempt from tax u/s 10(2A).The view that losses from income exempt from tax cannot be setoff with other incomes/ profits nor that such losses can be carried forward finds support from the Supreme Court judgement in the case of Harprasad & Co. (P) Ltd. 99 ITR 118.

Regards, Subash Agarwal, Advocate (M) 9830052141

Query: Section 14A of I.T. Rule 8D

Dear Friends,Section 14A of I.T. Act requires that expenditure in relation to income which is exempt would not be allowed. For calculation of same, method has been mentioned in Rule 8D.The said rule requires the value of average investment to be considered for calculation of disallowable amount.My query is what would be status if a person, who is a trader in shares, receives dividend from his stock in trade.There is no investment in his books only stock in trade.Whether value of average stock would be taken in place of average investment to a
rrive at the disallowable amount.Kindly give your valuable views.

Regards,PANKAJ KUMAR KEDIA.

Reply:

Dear Pankajji,Sub: Section 14A visavis StockinTrade In my opinion, where shares are held as stockintrade, no disallowance u/s 14A r.w. Rule 8D can be made. This view finds support from a recent Kerala High Court judgement in the case of CIT vs. Leena Ramchandran. Full text of this judgement has been mailed to all DTPA members and the details were carried in DTPA Journal, partIV, 20102011.

Regards, Subash Agarwal, Advocate (M) 9830052141 

Best Regards,
Pramod Dayal Rungta
M.Com.,LL.B.,AICWA.,DISA(ICAI).,FCA
Member EIRC ICAI (2010-12)

P.D.Rungta & Co.
Chartered Accountants

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