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Despite Proviso to s.14A, s. 14A disallowance can be made for earlier years
For AY 1995-96, the CIT passed an order on 29.12.99 u/s 263 directing the AO to disallow the interest on the moneys borrowed by the assessee for investing in the capital of a firm. In appeal, the Tribunal upheld the order of the CIT by relying on s. 14A even though s. 14A was inserted later by FA 2001 (w.r.e.f 1.4.62) & the Proviso provided that the AO was not empowered to reassess etc for any AYs beginning on or before 1.4.2001. On appeal by the assessee HELD dismissing the appeal:
The Proviso to s. 14A which gives protection to the assessee with respect to AY 2001-02 & earlier years was inserted w.e.f. 11.5.2001. As the order of the CIT u/s 263 was passed earlier on 29.12.99, the protection under the Proviso is not available.
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