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2012 (8) TMI 13 - AT - Income TaxLong term financing - benefit of section 36(1)(viii) - inclusion in the profit and gains - a) Interest on Bank deposits, b) Interest on advances / deposits, c) Dividend on investments, d) Misc. receipts - held that:- following the decision in (2011 (11) TMI 380 - DELHI HIGH COURT) wherein at was observed that though the aforesaid items of income can be said to be “attributable” to the business of providing long-term finance, that was not sufficient to attract the provisions of Section 36(1)(viii) and that the condition in the Section that the income should be “derived from” the business of providing long-term finance was not satisfied - Decided against the assessee. Deduction u/s 36(1)(viii) - held that:- When we compare the provisions of sec. 36(1)(viii) and sec. 80IB(1), we find that in both cases, deduction is allowable in respect of profits derived from relevant business. - Regarding service charges on SDF loans, admittedly, there is no finance given by the assessee as the entire financing in SDF Loans is by the Govt. and not by the assessee and the assessee is getting only some service charges for rendering certain services in that connection. Hence, this receipt can be said to be attributable to the business of proving long term finance but cannot be said to be derived from the business of providing long term finance. - Decided against the assessee. Alternative contention of the assessee that entire receipt on account of bank interest cannot be reduced from business profit for the purpose of calculating deduction u/s 36(1)(viii) allowable to assessee. - held that:- AO directed to work out the net profit which is liable to be disallowed as deduction u/s 36(i)(viii) after considering the assessee’s contention. In view of these facts, this issue is restored to the file of the Assessing Officer. Disallowance u/s 14A read with rule 8D - held that:- Sub-ss. (2) and (3) of s. 14A as well as r. 8D are prospective and not applicable retrospectively; however, even prior thereto, s. 14A required the AO to first reject the claim of the assessee with regard to the extent of such expenditure; for cogent reasons and then to determine the amount of such expenditure on the basis of a reasonable and acceptable method of apportionment - matter remanded back to AO.
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