2013 (9) TMI 764 - PUNJAB & HARYANA HIGH COURT

Disallowance u/s 14A of the Income Tax act - Clear nexus has not been established that the interest bearing funds have been vested for investments generating tax free dividend income – Held that:- Expenditure on interest was set off against the income from interest and the investment in the share and funds were out of the dividend proceeds - Disallowance under Section 14A was not sustainable - Disallowance under Section 14A requires finding of incurring of expenditure where it is found that for earning exempted income no expenditure has been incurred, disallowance under Section 14A cannot stand. In the present case finding on this aspect, against the revenue, is not shown to be perverse. Consequently, disallowance is not permissible – Decided against the Revenue.