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2006 (8) TMI 229 - AT - Income TaxExpenditure Incurred by dividend income - Disallowance of interest - investment in shares and debentures - cost of acquisition - HELD THAT:- The issue before us was considered at length by the Ahmedabad Bench of Tribunal in Harish Krishnakant Bhatt's case [2004 (8) TMI 342 - ITAT AHMEDABAD] concluded by holding that income being exempt from tax, no part of expenditure attributable to earning of such exempted income was to be allowed after the insertion of section 14A and it was held: Section 14A provides for disallowance of expenditure in relation to income which does not form part of the total income. It is assessee's own total income that is to be seen for applying the provisions of section 14A and not that of somebody else. Admittedly by virtue of section 10(33) dividend income is not includible/included in total income of an assessee shareholder. In other words by virtue of section 10(33) it does not form part of the total income of shareholder and, therefore, the expenditure incurred by the shareholder in earning that income would not be allowable. We hold that the interest paid on borrowed funds utilized for the purpose of investment in shares is not to be allowed as either an expenditure or as part of cost of acquisition of the shares in view of the provisions of section 14A of the Act. The appeal of the assessee is rejected. In the result, the appeal filed by the assessee is dismissed.
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