S. 14A disallowance to be made even if no tax-free income: Special Bench Delhi

The assessee had borrowed funds for the purpose of investing in shares. The shares were held for capital purposes as well as for investment purposes. In AY 2004- 2005, the assessee did not receive any dividend on the said shares and so there was no exempt income. The Special Bench had to consider whether the interest expenditure incurred by the assessee on the said borrowings used for purposes of investment in shares could be disallowed u/s 14A even though the assessee had not received any tax-free income in respect of the said shares. HELD, dec

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