Case Law Details
The primary issue that arises for consideration in these appeals is whether the CIT(A) as well as the Tribunal were right in allowing deduction of interest liability out of other income and the claim of the revenue to disallow the same under section 14A of the Act was justified.
The CIT(A) vide order dated 24.6.2004, Annexure A.II recorded as under:-
“7.2 Keeping in view the above facts and circumstances of the case it is held that the AO was not correct in applying section 14A of the IT Act in disallowing the expenditure on account of interest amounting to 46,91,684/-. It was incumbent on the AO to establish a nexus between the expenditure incurred and the income which was exempt under the Act. Facts clearly do nct support the action of the AO. Dis allowance is accordingly deleted. The AO is directed to recompute the income accordingly.”
Vide order dated 16.5.2008, Annexure A.III, the Tribunal on appeal by the revenue while upholding the finding recorded by the CIT(A) noticed as under:-
We have heard rival submissions and have pursued the material on record. From the reading of Section 14A the Act, it is clear that before making any dis allowance the following conditions are to exist:‑
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