#Section 14A IT Act

ITAT Delhi ruled that taxpayers cannot claim interest deductions under Section 36(1)(iii) if they fail to prove borrowed funds were exclusively used for business purposes, especially when those funds were also deployed in exempt income-generating assets. The ruling reinforces that Section 14A disallowance cannot be assumed - it must be substantiated with clear allocation evidence, impacting all businesses with mixed-use borrowings and exempt income streams.

ITAT Delhi ruled that disallowance under Section 14A read with Rule 8D is unsustainable if no exempt income exists in the relevant assessment year, even if investments were held. The decision reinforces that the 2020 Finance Act amendment, making dividends taxable in shareholders' hands, nullifies Section 14A applicability for such cases, impacting tax assessments for companies with non-yielding investments.