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2017 (10) TMI 1463 - AT - Income TaxDeduction u/s 80P(2)(d) on account of interest and dividend income earned and rental income earned for letting out of godown, etc. - section 14A r.w.r. 8D applicability while working out the claim of deduction u/s 80P(2)(d) - HELD THAT:- We find that the Ld. DR has rightly pointed out that the issue has already been dealt with by the Hon'ble jurisdictional High Court in the case of Punjab State Cooperative Milk Producers Federation Ltd. vs Commissioner of Income Tax & Anr. [2011 (3) TMI 615 - PUNJAB AND HARYANA HIGH COURT] wherein the applicability of the said section has been upheld. Applicability of rule 8D r.w.s. 14A has been upheld in the case of the assessee by the Tribunal and accepted by the assessee in preceding years. Therefore, we find no merit in the contention of the assessee that section 14A r.w.r. 8D is not to be applied for the purpose of calculating the deduction allowable u/s 80P(2)(d) of the Act. Enough surplus funds which are interest free and which is demonstrated from the quantum of share capital and reserves available with the assessee over the years - If an assessee establishes that its interest free funds were equal to or more than the interest bearing funds it would be open to it to contend that presumption arises that the expenditure for earning interest income was incurred from out of its interest free funds warranting no disallowance of interest expenditure u/s 14A r.w.r. 8D. Disallowance made on account of interest expenditure as per rule 8D(2)(ii) of the Rules be deleted. We direct that the expenses to be disallowed under rule 8D(2)(ii) be calculated by taking into account only those investments which have earned income during the year. Section 14A r.w.r. 8D is applicable for working out the deduction claimed u/s 80P(2)(d) by the assessee and that no disallowance of interest expenditure is allowable as per Rule 8D(2)(ii) while the expenditure to be disallowed as per Rule 8D(2)(iii) is to be calculated by taking into consideration only those investments which have earned income during the year. Denial of deduction u/s 80P(2)(e) - rental income earned by it from letting out of godowns for storage processing etc. - HELD THAT:- Undoubtedly, the assessee had been denied claim of deduction u/s 80P(2)(e) of the Act by the Ld.CIT(Appeals) following the order of the CIT(Appeals) in assessee’s case for assessment year 2011-12. As rightly pointed out by assessee in the said order the assessee had been denied deduction for want of evidence substantiating his claim of having earned rental income by letting out of godowns, warehousing, etc. As also rightly pointed out by the assessee the said evidence in the present case had admittedly been filed before the Ld.CIT(Appeals). Clearly, therefore, the Ld.CIT(Appeals) had erred in following his order for assessment year 2011-12 and dismissing assessee’s claim for deduction for want of evidence when the same had actually been filed before him - restore the matter back to the file of the Ld.CIT(Appeals) to adjudicate the issue afresh in the light of evidences filed by the assessee substantiating his claim and in accordance with law after giving due opportunity of hearing to the assessee.
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