Sec 14A

Rule 8DD(2) (ii)/(iii) specifies that it shall be covered into computation whether their is any direct nexus between the two or not...............

IT HAS TO BE INCLUDED INTO COMPUTATION...................

No since there is no nexus between exempted income and interest  paid/ accrued -  it indicates that all interest has been incurred for earning  taxable income and hence  fully allowed u/s 36(1)(iii)

Read

section 14A as follow

 [(1)] For the purposes of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act:]

 [Provided that nothing contained in this section shall empower the Assessing Officer either to reassess under section 147 or pass an order enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee under section 154, for any assessment year beginning on or before the 1st day of April, 2001.]

if there is no connection between exempt interest and interest claimed as expense , the crux of 14A is defeated and not applicable provided it is proved beyond reasonable doubt that there is no connection .