2014 (6) TMI 37

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.... Respondent : Mr. R. Vijayaraghavan, Advocate ORDER Per: Challa Nagendra Prasad: This appeal is filed by the Revenue against the order of the Commissioner of Income Tax (Appeals)-V, Chennai dated 24.03.2011 for the assessment year 2006-07. The only grievance of the Revenue is that Commissioner of Income Tax (Appeals) erred in deleting the disallowance made under section 14A of the Act. ....

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....ts that even provisions of section 14A read with Rule 8 D are not applicable for the assessment year 2006-07, still reasonable disallowance should be made. He relies on the decision of the Hon'ble Madras High Court in the case of M/s. Simpson & Co. Ltd., Vs. DCIT in Tax Case (Appeal) No.2621 of 2006 dated 15.10.2012 and submits that 2% of dividend income is reasonable disallowance under sectio....

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....;     "4.3 I have considered the facts of the case, the reasons given by the assessing officer and the submissions of the AR. From the records it is seen that as on 31-03- 2006, the total share capital and reserves and surplus as on 31-03-2006 was Rs.3,87,80,417/- and unsecured loan of Rs.47,82,24,831/-. Assessee company was having investments in the form of quoted and unq....

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....   4.4 Sec.14A requires the existence of direct nexus between the interest expenditure and dividend income. In the present case assessee has established the nexus between the interest expenditure and interest income earned. The investments from which dividend income "earned was found to have been made in the earlier years and out of its internal accruals. In CIT Vs. Hero Cycles 323 ITR 5....