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2015 (8) TMI 1037 - AT - Income TaxDisallowance u/s.14A - assessee submitted that no disallowance is warranted since the interest free funds available with the assessee in the form of share capital, reserve and surplus, and the same were used for the purpose of investment in assets, the income from which shall not or does not form part of the total income - Held that:- Admittedly, in this case the assessee is having enough interest free funds in the form of share capital and reserve and surplus. The amount of investment made by the assessee is less than the interest free funds. Further, Rule 8D was introduced with effect from 24.03.2008, which was prospective in operation and cannot be regarded as being retrospective as held by Delhi High Court in the case of Maxopp Investment Ltd vs. CIT [2011 (11) TMI 267 - Delhi High Court]. However, incurring certain administrative expenses cannot be ruled out. Thus we direct the Assessing Officer to disallow 2% of exempt income as income expenditure towards earning that income - Decided partly in favour of assessee. Whether disallowance, if any, under section 14A should go to increase the profit derived from the eligible undertaking(s)/ unit(s) for purpose of sections 10A? - Held that:- This issue is squarely covered by the order of the Bombay High Court in the case of CIT vs. M/s. Gem Plus Jewellery India Ltd [2010 (6) TMI 65 - BOMBAY HIGH COURT], wherein it was held that the assessee was entitled to exemption u/s.10A with reference to addition or disallowance of various payments, as the plain consequence of the disallowance and add back made by the Assessing Officer is an increase in the business profits of the assessee and the same to be considered for the purpose of computation of deduction u/s.10A of the act. Adopting the similar principle, we are inclined to direct the Assessing Officer to consider the disallowance u/s. 14A r.w Rule 8D as part of business profit so as to compute deduction u/s.10A of the Act. - Decided partly in favour of assessee. Travelling expenses incurred in foreign currency - whether are to be reduced from total turnover also for the purpose of computation of deduction u/s.10A ? - Held that:- This issue is squarely covered by the order of in the case of ITO vs. SAK Soft Ltd, (2009 (3) TMI 243 - ITAT MADRAS-D) wherein it was held that for the purpose of applying the formula under-sub-section (4) of section 10B, the freight, telecom charges or insurance attributable to the delivery of the articles or things or computer software outside India or expenses, if any, incurred in foreign exchange in providing the technical services outside India are to be excluded both from the export turnover and from the total turnover, which are the numerator and the denominator respectively in the formula. - Decided in favour of the assessee.
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