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2013 (5) TMI 553 - AT - Income TaxDisallowance u/s. 14A r.w.r. 8D - Asst. Years 2006-07 & 2007-08revenue appeal against part relief granted by CIT(A) - Held that:- With regard to indirect expenditure, it is in agreement with the assessment of the same by the Revenue at 0.5% of the average value of the investments held during the year. However, as indicated above, rule 8D being not mandatory, the said average value would have to be worked out with reference to the assessee's accounts, reflecting the timing of the said investment rather than in a presumptive manner by according equal weight to the opening and the closing values of the investment. The matter would therefore require being set aside back to the file of the FAA for adjudication afresh in accordance with law per a speaking order. Entire expenditure stands carried over in the form of work-in-progress (WIP) for the relevant years. As such, no disallowance for the current year/s would arise, as the disallowance would only result in reduction of the WIP to the extent of the amount/s disallowed. Merit in this alternate argument, which of course would be required to be verified at the end of the A.O. Assessment Year 2008-09 - disallowance u/s.14A. with reference to rule 8D - Held that:- Rule 8D being mandatory for the current year. This is as the assessee has not been able to substantiate its claim that no expenditure whatsoever stands incurred in relation to the tax-free investments, which in fact have again witnessed an increase for the current year, i.e., at an average of Rs.871.76 lakhs, as against at Rs.579.88 lakhs for the immediately preceding year. Considering large scale movement in funds during the year & Not only has the investment portfolio witnessed a (net) increase of approximately Rs.2 crores, the interest expenditure stands reduced to a mere fraction, i.e., to Rs.8.72 lakhs (for the current year) from Rs.67.82 lakhs for A.Y. 2007-08, signifying retirement of debt to a substantial extent. Under the circumstances, therefore, the interest disallowance on a generalized basis, particularly considering that the assessee has not made out any case, cannot be faulted with. The disallowance is, therefore, confirmed.
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