Section 14A applicable to Dividend Income despite liable to Dividend Distribution Tax

In a recent landmark ruling, the Supreme Court held that dividend income is to be construed as exempt income and may attract disallowance under Section 14A, despite the same being liable to dividend distribution tax. The Supreme Court also made critical observations on issues like recording of dissatisfaction by tax officer and proving nexus between dividend income and related expenditure.

We, at BDO, have summarised the ruling and the important principles laid down therein. We hope you find it useful.