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2014 (4) TMI 1084 - AT - Income TaxDisallowance u/s 43(1) - CIT(A) deleted the disallowance on account of depreciations - whether A.O. correctly made the said disallowance by applying Explanation-10 to section 43(1)? - Held that:- In order to invoke Explanation 10, it is necessary to show that the subsidy was directly or indirectly used for acquiring an asset. This is again a question of fact. The relatable subsidy to such asset can be reduced from the cost only if it is found that the cost for acquiring that asset was directly or indirectly met out of the subsidy.Likewise in the proviso, it is necessary to show that the subsidy has been directly or indirectly used to acquire an asset but it is not possible to exactly quantify the amount directly or indirectly used for acquiring the asset. Here also, a finding of fact is necessary that an asset was acquired by directly or indirectly using the subsidy. The above Explanation and the proviso thereto do not dilute the finding of the Hon’ble Supreme Court in the case of P. J. Chemicals Ltd. [1994 (9) TMI 1 - SUPREME Court] that asset-wise subsidy alone can be reduced from the actual cost. The above Explanation and the proviso therein attempt to explain the law. They are not bringing any new law different from the law considered by the Hon’ble Supreme Court in the above cases. CIT(A) has rightly allowed the claim of depreciation of assessee. We uphold the same. - Decided against revenue. Disallowance of expenses at 1% of exempted income by invoking the provisions of section 14A - Held that:- We find that the relevant assessment year involved is 2007-08 and Hon’ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. vs. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT ] wherein it is held that Rule 8D of the Rules as inserted by the I. T (Fifth Amendment) Rules, 2008 w.e.f. 24.3.2008 is prospective and not retrospective. The CIT(A) restricted the disallowance at 1% of the exempted income u/s. 14A of the Act. We find no infirmity in the order of CIT(A) and hence, the same is confirmed. - Decided against revenue.
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