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2012 (10) TMI 1095 - AT - Income TaxApplicability of higher rate of tax is decided against the assessee. Disallowance of expenditure on purchase of fixed assets is also decided against the assessee. Disallowance of bonus expense is decided in favour of the assessee. Disallowance of expenses incurred in relation to exempt income u/s 14A - Held that:- In principle, we hold that the disallowance of interest is called for in the current year as well. As sufficient details in this regard are not available about the amount invested in tax free bonds and its co-relation with the borrowed funds, if any, we restore the matter to the file of A.O. for computing the disallowance u/s 14A on the interest component after verification of the necessary details after allowing a reasonable opportunity of being heard to the assessee. Also disallowance at 2% of exempt income for management / administrative expenses is in order Deduction u/s 44C towards head office expenses attributable to Indian operations - Held that:- Article 7(3) does not talk of limiting the deduction of expenses incurred for the business of the permanent establishment subject to the limitations contained in the Act. While discussing this issue for assessment year 1999-2000 in the context of section 43B, we have held that the restriction contained in specific sections cannot apply in the light of the language of Article 7(3) of the DTA. In that view of the matter, the restriction contained in section 44C for allowing the head office expenditure can also not apply. Resultantly the direction given by the learned CIT(A) to modify the adjusted total income as per section 44C becomes infructuous as section 44C itself cannot apply. This ground is allowed.
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