The assessee claimed a loss which included the interest on borrowed funds for investment.  Since the investments in yielded dividend which was exempt from the total income, the AO made a disallowance under S. 14A and the balance under S. 57(iii) for diverting funds for non-business purposes. The CIT(A) deleted the addition since there was no dividend earned by the assessee and there was no diversion of funds, for non-business purposes. He held that in the absence of dividend there was no case for making the disallowance under S.14A. Dismissing the appeal of the revenue the Tribunal held that the AO invoked S.14A read with rule 8D of the Income-tax Rules, 1962 incorrectly and made the disallowance without the assessee having earned the dividend.  Hence no disallowance was called for under S. 14A in the absence of dividend.  (AY.2012-13, 2013-14).