Section 115JB(2) of the Income Tax Act

Where an assessee has sufficient interest-free funds, investments yielding exempt income are presumed to be made out of such funds, precluding disallowance of related interest expenditure under section 14A.

To determine if an expense is capital or revenue expenditure, the test focuses on whether the expenditure creates a capital asset or yields an enduring commercial advantage.

A decision is considered 'per incuriam' if rendered through inadvertence, such as when a court acts in ignorance of its own previous decisions, a superior court's decision, or statutory provisions. Further, defining a word in a statute implies that it has no other meaning, thereby restricting the scope unless additional categories are expressly included.

Disallowance under Section 14A is not warranted merely because an assessee has sufficient interest-free funds to make investments that yield exempt income. No disallowance is called for if no expenditure is found to have been incurred for earning exempt income.

Decisions of a larger bench of the Supreme Court are binding on benches of lesser or equal strength, and decisions of a smaller bench can be considered obiter dicta if they are in conflict with larger bench decisions.

No disallowance of interest is warranted on interest-free advances to associated concerns when the assessee possesses substantial interest-free funds, such as shareholders' funds.