Explain in brief the treatment as to the taxability and/or allowability, in the context of provisions contained under the Income-tax Act, 1961 for the assessment year 2016-17, in the following cases: Aroma Ltd., an inves

The dividend income of ₹3,00,000 earned by Aroma Ltd. on equity shares held as investment in domestic companies is exempt under the provisions of section 10(34) of the Income-tax Act, 1961 . Further, as per section 14A of the Income-tax Act, 1961 , no expenditure is allowable in respect of income which does not form a part of total income or which is an exempt income. The interest paid of ₹2,00,000 on borrowed capital is an expenditure incurred in respect of share purchased for investment. Since the dividend income received on shares is exempt and does not form a part of total income of Aroma Ltd., the interest expenditure of ₹2,00,000 incurred by Aroma Ltd. is not allowable as deduction in the AY 2016-17.