I’m not sure if the decision of the tax office has a legal ground. I’m not a lawyer, but the interest payments should be counted in proportion to your actives?
https://www.admin.ch/opc/de/classified-compilation/19670167/index.html#id-2-2-c
So if you have 500k in funds that yield 2%, 700k mortage at 1% and a home that is worth 1’000k, then 2.3k of the 7k interest payments should be deducted from the 10k dividends.
If you make the calculation (10k*15%)/(10k-7k*(500k/(500k+1'000k))), then you would need a tax rate of 20% to receive the full amount.