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2016 (1) TMI 133 - AT - Income TaxDisallowance u/s.14A of the Act by invoking Rule 8D - Held that:- Though Rule 8D of Income Tax Rules 1962 is not applicable, and provisions of Sec.14A of the Act is only applicable for the assessment year 2008-2009 as the Rule was introduced w.e.f. 24.03.2008. The assessee might have incurred certain administrative expenditure to earn this income. Thus we are inclined to direct the Assessing Officer to disallow 2% of exempt income towards expenditure incurred to earn exempt income. - Decided partly in favour of assessee Exclusion of interest on the margin money deposited with the bank while computing the deduction u/s.10B - Held that:- Similar issue was considered by Madras High Court in the case of Dollar Apparels vs. ITO (2007 (2) TMI 120 - HIGH COURT, MADRAS) wherein it was held that interest on deposits with bank even assuming that the bank had insisted for making short term deposits for opening letters of credit is not income derived from export business hence not eligible for deduction u/s.80HHC Disallowance u/s 14A - Held that:- Disallowance u/s.14A r.w. Rule 8D should not exceed the exempt income. The Mumbai Bench in the case of M/s. Daga Global Chemicals Pvt. Ltd. [2015 (1) TMI 1204 - ITAT MUMBAI] sustained the disallowance on applicability of provisions of sec.14A r.w. Rule 8D. However, the alternative claim of the assessee was that disallowance if at all should be made, it should be restricted to exempt income earned and not beyond that. Accordingly, the AO is directed to look at this issue on this angle and decide it afresh. Loss on account of cancellation of forward contracts in forex derivatives - business loss OR speculation loss - Held that:- In this case, the Commissioner of Income Tax (Appeals) given an direction to the Assessing Officer to verify any forward contracts have been cancelled prematurely and verify the reasons for premature cancellation in the light of the order of the Tribunal in the case of London Star Diamond Company (I) P. Ltd vs. DCIT [2013 (11) TMI 424 - ITAT MUMBAI] wherein it was observed that loss arising from cancellation of premature is allowed as business loss. Being so, the assessee cannot have any grievance on this issue as Commissioner of Income Tax (Appeals) has given direction to follow the Tribunal order. Further, we make it clear that loss arising out of derivative transaction in excess of export turnover has to be considered as speculative loss because excess derivative transaction has no proximity with export turnover.
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