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2014 (10) TMI 289 - ITAT DELHIInvocation of section 14A r.w Rule 8D – Held that:- The assessee has made investment to the tune of ₹ 2,18,16,75,912/-. It is claimed that ₹ 2,16,09,61,251/- was received from redemption of investments - The assessee’s claim that investments were from the proceeds of redemption of old investments and cash surplus generated by way of interest income on UTI Bonds and dividend income on mutual funds investment - Rule 8D is applicable for AY 2008-09 and earlier decision on the disallowance u/s 14A shall not have impact for applicability of Rule 8D for the year under consideration - Rule 8D of the Income-tax Rules, 1962 is mandatory by using the word “shall” in section 14A(2), the legislature made it mandatory for the AO to determine the amount of expenditure incurred in relation to exempt income according to the prescribed method - the AO has not considered all relevant facts on record and has also not verified the claim of the assessee with regard to the source of investment - To reach at the conclusion that he was not satisfied with the claim of assessee with regard to expenses incurred to earn exempted income, then only he can invoke Rule 8D for working out the disallowance – the matter requires a relook at the level of AO – thus, the matter is remitted back to the AO for fresh adjudication. Administrative and other expenses disallowed – Held that:- Being 0.5% of average value of investment, the assessee’s claim is that average value of investment taken by the Assessing Officer was ₹ 2,50,20,59,294/- instead of ₹ 41,88,44,725/- which is only 16.94% of the average value of investment taken by the Assessing Officer - for this aspect also, the matter is remitted back to the AO for fresh adjudication. TDS deducted disallowed u/s 194J – Amount deposited on or before due date of filing of return – Held that:- Transferring or shifting expenses to a subsequent year, in such cases, will not wipe off the adverse effect and the financial stress - Nevertheless the Section 40(a)(ia) has to be given full play keeping in mind the object and purpose behind the section - At the same time, the provision can be and should be interpreted liberally and equitable so that an assessee should not suffer unintended and deleterious consequences beyond what the object and purpose of the provision mandates - it must be so construed so as to effectuate the liability imposed by the charging section and to make the machinery workable - when the machinery section results in unintended or harsh consequences which were not intended, the remedial or correction action taken is not to be disregarded but given due regard - the amendment to be interpreted liberally and retrospective – Decided in favour of assessee. Loss on sale of investment – Held that:- CIT(A) rightly was of the view that loss on sale of investment has already been considered as it has shown Net Profit on Sale of Investment is correct - In the Computation of Income, the appellant while computing the business income has excluded Net Profit on Sale of Investment and has also considered the same under the head Capital Gains - revenue has not controverted the findings of the CIT(A) that the loss on the sale of investment has been excluded in computation of business income and the same has been considered under the head ‘capital gains’- Decided against revenue. Valuation of closing stock – Held that:- Assessee valued the closing stock on cost or net realizable value whichever is lower - since the appellant is following the method of valuation consistently on cost or net realizable value whichever is lower, which is a prescribed method under AS -2 issued by the Institute of Chartered Accountants of India, the addition on account of Closing Stock of ₹ 10,79,68,722 is hereby deleted - the assessee is valuing closing stock on cost or net realizable value whichever is lower since 1993 - assessee should compute the closing stock on cost basis i.e. Net realizable Value plus reimbursement, which is nothing but the cost price - there is no fault in the order of the CIT(A) – Decided against revenue.
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