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2011 (4) TMI 873 - AT - Income TaxDisallowance u/s. 14A - borrowed funds had been diverted for non business purposes for investment in shares - Held that:- Perusal of the Balance Sheet as on 31.3.2003 shows that the assessee has a reserve and surplus as on 312.3.2003 at Rs. 70.71 crores & 31.3.2002 was of Rs. 59.36 crores which has increased to Rs. 70.71 crores during the year ended 31.3.2003. The secured loans during the year ended 31.3.2002 was Rs. 19.62 crores which came down as on 31.3.2003 to Rs. 17.92 crores whereas the unsecured loans as on 31.3.2002 stood at Rs. 6.73 crores which also came down to Rs. 5.68 crores as on 31-3-2003. Thus the claim of the assessee that the assessee did have sufficient funds in the form of surpluses and reserves to cover the investment in the purchase of shares stands supported. No disallowance out of the interest expenditure as made by the AO and as confirmed by the CIT(A) is sustainable - in favour of assessee. Deduction u/s. 80HHC - AO excluded 90% of the share of expenses and cash discount - Held that:- There is no mention of any portion of the same to be discounts nor has the break up of the said amount between the rentals recovered and the discounts been placed before us. Admittedly, the said amount is the rentals in relation to the warehouse. Whether it is from the dealers or from the group companies the recoveries are nothing but rentals. The same having been shown in the income side it would have to be deemed that these are subletting charges received by the assessee and consequently in view of the specific provisions of clause (baa) of the Explanation to section 80HHC, we are of the view that the exclusion of the 90% of the same is on the right footing and does not call for any interference - against assessee. Deduction u/s 80HHC after reducing the deduction u/s 80-IB - Held that:- The issue is squarely covered by the decision of M/s. MRF Ltd., [2009 (10) TMI 653 - MADRAS HIGH COURT] stating that for deduction u/s 80HHC the deduction allowed u/s 80IB need not be reduced from the business profits - AO is directed to grant deduction u/s 80HHC without reducing the deduction u/s. 80IB - in favour of assessee. Restricting the deduction u/s. 80-IB - overhead expenses attributed to the new industrial unit - Held that:- As decided in Food Specialities Ltd. vs. ACIT [1995 (3) TMI 156 - ITAT DELHI] the basis of turnover would be one of the factors for working out the reasonable amount of over head expenses attributable to the new unit. The other important factor was the increase in the overhead expenses incurred by the assessee after the setting up of the new unit. The increased expenditure could be apportioned between the old units and the new units on the basis of turnover. Thus in this view of the decision the issue is set aside and restored to the file of the AO to consider the actual expenses - in favour of assessee by way of remand. Inclusion of scrap sales in the total turnover while computing the deduction u/s 80HHC - Held that:- As decided in CIT Versus K. RAVINDRANATHAN NAIR [2007 (11) TMI 10 - SUPREME COURT OF INDIA] the scrap sales formed part of the gross total income and as per the provisions of clause (baa) of the Explanation to section 80HHC, 90% of the same is to be deducted from the business profits.
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