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2012 (12) TMI 821 - AT - Income TaxDeduction of interest expense - Against income from non-tonnage activities Tonnage tax Assessee is engaged in shipping business Assessee claim interest expenditure incurred wholly and exclusively for the purpose of its non-tonnage tax activities AO argued that loans availed for shipping activities had been diverted to non-tonnage tax activities Held that:- Loans which were availed for ship related activities have been diverted to non-tonnage tax activities. The expenditure incurred for earning such income has to be allowed against such income. Therefore, interest expenditure was incurred wholly and exclusively for the purpose of non-tonnage tax activities and allowed as deduction. In favour of assessee Disallowance u/s 14A Rule 8D Computation of income Applicability of Rule 8D - prospectively or retrospectively - Expenditure incurred in relation to earning of exempt dividend income Held that:- Following the decision in case of Godrej & Boyce Mfg. Co. Ltd. (2010 (8) TMI 77 - BOMBAY HIGH COURT) that provisions of Rule 8D are applicable from A.Y 2008-09 and cannot be applied retrospectively. Rule 8D applied by the AO to work out the disallowance u/s 14A was not applicable to the year under consideration. In favour of assessee Tonnage taxation Chapter-XII-G - Computation of income from business of operating qualifying ships u/s 115VA - Exclusion from tonnage income - Bad debts recovered - Crude oil refund - General average claims received - Held that:- Following the decision in case of Shipping Corporation of India Ltd. (2011 (7) TMI 588 - ITAT, MUMBAI) that when all the ships of the assessee are qualifying ships and when there is no other activity other than core activities and incidental activities, in our opinion, a third category of other business income cannot be created. In favour of assessee Tonnage taxation - Chapter-XII-G - Exclusion from tonnage income liabilities u/s 41(1) of prior periods written back Expenditure claimed in pre-tonnage tax scheme - Held that:- Following the decision in case of Shipping Corporation of India Ltd. (2011 (7) TMI 588 - ITAT, MUMBAI) that section 115VA, it is clearly provided that sections 28 to 43C would not over-ride the computation of profits and gains u/s 115VA. As section 41(1) falls within sections 28 to 43C, no separate addition under that section can be made. In favour of assessee
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