TaxTMI Login
AI OCR ✕Convert scanned orders, printed notices, PDFs and images into clean, searchable, editable text within seconds. Starting at 2 Credits/page
Try Now →Just a moment...
AI OCR ✕Convert scanned orders, printed notices, PDFs and images into clean, searchable, editable text within seconds. Starting at 2 Credits/page
Try Now →
Press 'Enter' to add multiple search terms. Rules for Better Search
Use comma for multiple locations.
---------------- For section wise search only -----------------
Accuracy Level ~ 90%
of 
Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
Note
Bookmark
Share
Don't have an account? Register Here
of Press 'Enter' after typing page number.
Issues: (i) Whether revision under section 263 was valid on the ground of proposed disallowance under section 14A in the absence of exempt income; (ii) Whether revision under section 263 was valid on the ground of proposed disallowance of interest under section 36(1)(iii) in respect of alleged diversion of borrowed funds.
Issue (i): Whether revision under section 263 was valid on the ground of proposed disallowance under section 14A in the absence of exempt income.
Analysis: The assessment was sought to be revised because the Assessing Officer had not made a disallowance under section 14A read with Rule 8D. The record showed that no exempt income had been earned during the year. The settled legal position, as applied in the decision, is that disallowance under section 14A cannot be made where there is no exempt income.
Conclusion: The revision on this issue was not sustainable and is held against the Revenue.
Issue (ii): Whether revision under section 263 was valid on the ground of proposed disallowance of interest under section 36(1)(iii) in respect of alleged diversion of borrowed funds.
Analysis: The alleged interest-free advances were found to have been made in earlier years, not during the year under consideration. The assessee also had sufficient own interest-free funds. On these facts, diversion of current year borrowed funds was not established, and the precondition for disallowance of interest was absent. Applying the principle that section 263 can be invoked only when the assessment order is both erroneous and prejudicial to revenue, the order did not satisfy the statutory threshold.
Conclusion: The revision on this issue was not sustainable and is held against the Revenue.
Final Conclusion: The revisional order was quashed because the prerequisites for invoking section 263 were not met, and the assessment order was restored to that extent in favour of the assessee.
Ratio Decidendi: Section 263 can be invoked only when the assessment order is both erroneous and prejudicial to the interests of revenue, and a disallowance under section 14A cannot be made in the absence of exempt income.
TaxTMI 
TaxTMI 
