https://www.taxtmi.com/caselaws?id=800413 Interest expenditure directly attributable to taxable interest income under a back-to-back borrowing-and-lending arrangement falls outside the interest disallowance mechanism for expenditure relating to exempt income. Section 14A(2) read with Rule 8D(2)(ii) applies only where interest expenditure is not directly attributable to particular income or receipts. Where borrowed funds generate corresponding taxable interest receipts exceeding the interest payment, the direct nexus with taxable income prevents disallowance. The absence of separate accounts or the use of mixed funds does not negate that established nexus. Accordingly, the interest disallowance was unsustainable and its deletion was upheld. en-us Thu, 24 Sep 2026 00:00:00 +0530 Tue, 06 Oct 2026 08:13:55 +0530 TaxTMI RSS Generator https://www.taxtmi.com/caselaws?id=800413 Interest expenditure directly attributable to taxable interest income under a back-to-back borrowing-and-lending arrangement falls outside the interest disallowance mechanism for expenditure relating to exempt income. Section 14A(2) read with Rule 8D(2)(ii) applies only where interest expenditure is not directly attributable to particular income or receipts. Where borrowed funds generate corresponding taxable interest receipts exceeding the interest payment, the direct nexus with taxable income prevents disallowance. The absence of separate accounts or the use of mixed funds does not negate that established nexus. Accordingly, the interest disallowance was unsustainable and its deletion was upheld. Case-Laws Income Tax Thu, 24 Sep 2026 00:00:00 +0530 https://www.taxtmi.com/caselaws?id=800413