Godrej & Boyce Manufacturing Co.Ltd vs Dy.Commr.Of I.T.Mumbai & Anr

The Supreme Court addressed the admissibility of deductions for expenditure incurred in earning dividend income exempt under Section 10(33) of the Income Tax Act, 1961. The Court held that the Assessing Officer must establish a clear nexus between borrowed funds and the investment generating exempt income to disallow deductions. The ruling emphasized that the absence of fresh capital investment and the availability of interest-free funds supported the appellant's claim for full exemption of dividend income, thereby upholding the decisions of the lower authorities in favor of the appellant.