Section 14A of the Income Tax Act

When an assessee has sufficient interest-free funds available, and investments are made from mixed funds, it is presumed that the investments are made from the interest-free funds, thus precluding the disallowance of interest expenditure.

Penalty under Section 271(1)(c) for furnishing inaccurate particulars or concealment of income is not automatically leviable if the assessee has made a full disclosure of all particulars and the addition or disallowance arises from a difference of opinion.

An assessee cannot raise a new claim or a claim not made in the original or revised return of income for the first time directly before the Assessing Officer during assessment proceedings.

The principle of consistency dictates that if the facts and circumstances remain unchanged across assessment years, the revenue cannot adopt a divergent or adverse position on an issue that was previously allowed after due deliberation.

A disallowance under Section 14A of the Income-tax Act, 1961, for expenditure incurred in relation to exempt income cannot be made if the assessee has not earned any exempt income during the relevant previous year.

Disallowance under Section 14A is not automatic and requires the Assessing Officer to record satisfaction before applying Rule 8D. Only investments yielding exempt income are considered for disallowance, irrespective of their strategic nature.

Interest paid on borrowed funds cannot be disallowed merely because the assessee made interest-free advances, provided those advances were made for business purposes and commercial expediency. The Revenue cannot dictate a businessman's commercial decisions, but the assessee bears the onus to prove the business expediency.

When an assessee possesses interest-free funds sufficient to cover investments yielding tax-free income, it is presumed that such investments were made from these interest-free funds, precluding disallowance of interest expenditure under Section 14A.

Rule 8D, for computing disallowance under Section 14A for expenses related to exempt income, applies from Assessment Year 2008-09 onwards; for prior years, a reasonable disallowance must be made. The disallowance under Section 14A cannot exceed the actual exempt income earned.

Appellate authorities can entertain fresh claims or revised computations of income made by an assessee, even if these were not submitted through a revised return of income.