Disallowance for provision of leave encashment u/s 043(f) - HELD THAT:- the AO observed in assessment order that the assessee has made a provision for leave encashment for a total sum of ₹ 35,10,455/-, which included liability on account of earlier Optical Fiber Goal Ltd., which merged with the company with a scheme of merger as approved by the Court. In appeal, the CIT(A) confirmed the action of the AO. we find that this issue is squarely covered in favour of the assessee by the decision of Hon’ble Calcutta High Court in the case of Exide Industries Ltd. Vs. Union of India [2007 (6) TMI 175 - CALCUTTA HIGH COURT].
Disallowance u/s 014A by invoking rule 008D of the I. T. Rules, 1962 - In Present case, we find that the assessee earned a sum of ₹ 5,31,095/- as dividend income and claimed that it did not have incurred any expense for earning such dividend income. The lower authorities following the decision of Special Bench, ITAT in the case of Daga Capital Management Pvt. Ltd. [2008 (10) TMI 383 - ITAT MUMBAI] disallowed the sum of ₹ 15,01,665/- on estimate basis as inadmissible deduction from business income u/s. 014A of the Act r.w. r 008D of the I. T. Rules.
In view of facts of this case and the principle laid down by Hon’ble Bombay High Court in the case of Godrej Boycee Mfg. Co. Ltd.,[2010 (8) TMI 77 - BOMBAY HIGH COURT] that Rule 008D is applicable for and from assessment year 2008-09 and prior to that the Assessing Officer can make estimate in the given facts and circumstances. Hence, we restrict the disallowance to 1% of dividend income and direct the Assessing Officer to calculate the expenditure on that basis. This ground of assessee’s appeal is partly allowed.
In the result, the appeal of the assessee is partly allowed as indicated above.
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