2010 (1) TMI 646

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.... original assessment as a deduction which is otherwise not allowable by virtue of the express provision contained in section 14A of the Income-tax Act. The deduction claimed by the assessee is interest paid on borrowed funds for investment in a partnership firm where from the assessee as partner got share income which is exempt from tax under section 10(2) of the Income-tax Act. Admittedly the claim of deduction made by the assessee and allowed by the officer is expressly prohibited by section 10A which prohibits grant of deduction of any expenditure incurred by the assessee in relation to any income which does not form part of the total income computed under the Act. Since the claim of deduction was wrongly allowed, the order happened to b....

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....educing a refund already made or otherwise increasing the liability of the assessee under section 154, for any assessment year beginning on or before the 1st day of April, 2001." It is clear from the above proviso that even though the scheme of disallowance of expenditure incurred by the assessee in relation to income exempted under the Act is introduced with retrospective effect from 1-4-1962, Parliament has chosen to implement the provision only from the assessment year 2001-02 because express prohibition is introduced in the proviso against Assessing Officers reopening or rectifying assessments under section 147 or under section 154 for withdrawing deduction allowed in assessments concluded for periods prior to 1-4-2001. The contention ....