deduction of interest expense - s. 14A

[ddshah]

There are certain High Court decisions on the issue that in case if the interest is not allowed as deduciton, the same could be added to the cost of acquisition. This could have been useful in cases where the interest paid on borrowings used for investment in shares is disallowed due to s. 14A.

However, there are 2 decisions on the issue, i.e. Macintosh Finance Estates Ltd v. ACIT [12 SOT 324] (Mum) and Mohanlal M.Shah v.Dy,CIT [105 ITD 669] (Mum). Both these decisions hold that the interest so disallowed cannot be added to the cost of acquisition.

1.  Is there any decision in favour subsequent to these decisions.
2.  What would be the position in law for s. 14A for AY 1998-99 where the dividend is taxable upto 1.6.1997. Can it be said that the income is not such ' which does not form part of the total income' (as income for part of the year forms part of the total income). In such case, can we claim that s. 14A is not applicable?