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Thursday, 30 July 2015 16:38

Taxability of Lawyer's Income & Diasllowance us 14A - Delhi High Court

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Where expenditure incurred by the assessee was not attributable for earning the exempt income disallowance u/s 14A was not warranted. Further, for lawyers and law firms, categorization of a receipt can take place only when the matter was over or as when the assessee decides on the quantum of fees and not before that.


  1. Assessee a legal professional
  2. Assessee received advances from the clients and are kept in a separate ledger account in the name of the client and debited for the expenses
  3. After the matter is settled the credit balance lying in the client’s account tarnasferred to P & L A/c
  4. Where the matter is pending the credit balances are carried forward
  5. AO made addition on the ground that assessee adopted cash system of accounting and should be taxed in the year of receipt
  6. CIT (A) partly allowed
  7. Department moved to the Tribunal
  8. Tribunal held that the view taken by the ITAT earlier in AY 2001-02 and 2003-04 under similar circumstances must be followed.
  9. Addition u/s 14A deleted by the Tribunal on the ground that the AO had not recorded any finding that any expenditure incurred by the Assessee was attributable for earning the exempt income. In order to disallow the expenditure there must be a nexus between the expenditure incurred and the income not forming part of the total income
  10. Department moved to the High Court
  11. Revenue’s appeal dismissed by the High Court


The Court finds that no substantial question of law arises for determination by the Court from the impugned order of the ITAT

Cases Referred to

Jitender Sharma vs. DCI ITA No.1765/Del/2002
M/s. Anand & Anand ITA No.3820/Del/2004

Additional Info

Read 12525 times Last modified on Saturday, 13 February 2016 17:04
Deepak Kumar

A Post Graduate and Chartered Accountant Deepak Sinha is a member of Taxpundit's core team. An analytical, result oriented professional with more than 10 years of combined experience in industry and consultancy.

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  • Comment Link Amit Wednesday, 05 August 2015 15:50 posted by Amit

    I dont think so...the above decision clearly says that Where expenditure incurred by the assessee was not attributable for earning the exempt income disallowance u/s 14A was not warranted.

  • Comment Link meenakshi Saturday, 01 August 2015 14:19 posted by meenakshi

    assessee is having agricultural income and also business income. Seperate accounts were made. Can section 14A be applied for earning agricultural income on pro-rata basis?

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