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2015 (1) TMI 301 - AT - Income TaxDisallowance u/s 14A - disallowance made by AO was much more than the expenditure incurred by assessee in its profit and loss account - Held that:- in addition to exempt income there was also other taxable income during the year in the form of profit on sale of shares of ₹ 8.64 lakhs, profit on redemption of debentures of ₹ 80.02 lakhs – The year under consideration is assessment year 2007-08, whereas Rule 14A was made applicable from Assessment Year 2008-09 as as held in GODREJ AND BOYCE MFG. CO. LTD. Versus DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (8) TMI 77 - BOMBAY HIGH COURT] - even in earlier years reasonable disallowance is required to be made - there is no reason to compute disallowance as per Rule 8D during the relevant AY 2008-09 - the AO is directed to disallow 50% of total expenditure of ₹ 4.65 lakhs in addition to disallowance of interest expenditure of ₹ 230 lakhs, attributable to earning of exempt income out of total interest expenditure of ₹ 236.73 lakhs. Redemption on debenture to be treated as capital gain or not – held that:- the AO has not treated the amount received on redemption as capital receipt on the plea that there was no transfer within the meaning of Section 2(47) - redemption of debenture amount to transfer within the meaning of Section 2(47), therefore, the lower authorities were not justified in not treating redemption on debenture as capital gain - the AO is directed to tax the gain under the head capital gains in place of income from other sources – Decided partly in favour of assessee.
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