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Disallowance of interest incurred on exempt income

This query is : Resolved 
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(Querist)
16 May 2013 Dear Expert,
My client's Interest Income has been disallowed because the loan which he has taken was utilised for purchase of shares.Since dividend that is derived from Shares is exempt.
Expenses incurred on Exempt income could not be claimed as deduction.

Is this Right?If there is any Case or Supreme Court Decision,please also tell us?

Waiting for Prompt Response!

Thanks In Advance

Best Regards
Dhiraj Kumar
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Bhaskaran Chackrapani Warrier

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Bhaskaran Chackrapani Warrier (Expert)
16 May 2013 Disallowance is correct. Refer section 14A of the Income tax Act,1961.
Citation:- Godrej & Boyce.... Vs. DCIT 328 ITR 81 (Bom).
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Dhiraj kumar

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Dhiraj kumar (Querist)
16 May 2013 Thanks Sir
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