Disallowance cannot be made U/s 14A if there is no tax-free income

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

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