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2018 (10) TMI 1821 - AT - Income TaxDeduction u/s 10AA - CIT(A) recorded a finding that interest income disclosed by the assessee is to be treated as business income, because it has nexus with the export activities of the assessee and accordingly allowed appeals of the assessee - HELD THAT:- We are of the view that the ld.CIT(A) has rightly considered the judgment relied upon by the assessee, and has rightly held that interest income earned by the assessee on FDRs. for obtaining LC is the business income of the undertaking which is to be taken into consideration while calculating deduction under section 10AA of the Act. It appears that the ld.CIT(A) has mentioned a wrong amount for the Asstt.Year 2013-14. The deduction claimed by the assessee was at ₹ 3,80,14,434/- whereas in the ground, the Revenue has made a mention of the amount agitated in the Asstt.Year 2012-13. Nevertheless, in principle, we are holding that interest income earned by the assessee is to be assessed as business income of the undertaking eligible for claim of deduction under section 10AA of the Act. Thus, the is ground of appeal is rejected in all three years. Whether brought forward loss and unabsorbed depreciation is to be set off before calculating deduction admissible under section 10AA of the Act or not? - HELD THAT:- As decided in INDUSA INFOTECH SERVICES (P.) LTD. [2013 (9) TMI 1150 - GUJARAT HIGH COURT] decided this question in favour of the assessee i.e. upholding allowance of deduction under section 10A before set off of any balance unabsorbed loss and depreciation of noneligible business units of the assessee. Somewhat similar issue has been considered by the Hon’ble Supreme Court in the case of Yokogawa India Ltd. [2016 (12) TMI 881 - SUPREME COURT] as held that for the purpose of calculation of deduction under section 10AA it has to be computed prior to set off of these unabsorbed deprecation, brought forward loss of other units. Disallowance u/s 14A to be added back in the book profit for the purpose of section 115JB - HELD THAT:- We have adjudicated this issue in the case of Gujarat Fluorochemicals Ltd. [2018 (8) TMI 857 - ITAT AHMEDABAD] we hold that even if some addition has been confirmed under section 14A, then also it could not be adjusted in the book profit for the purpose of section 115JB. Disallowance made out of claim under section 10AA should not be adjusted in the book profit for the purpose of section 115JB - CIT(A) has deleted this adjustment on the ground that the disallowance itself has been deleted - HELD THAT:- We do not find any error in the order of the ld.CIT(A), because we have already deleted disallowance made under section 10AA. Once there is no amount available for disallowance, no question arises for making adjustment in the book profit. This ground of appeal is rejected in both the years. Disallowability of certain expenditure with the aid of section 14A r.w.s 8D relatable to earning of tax free income - HELD THAT:- In recent judgment, Hon’ble Supreme Court has upheld the disallowance of expenditure relatable to tax free income even if such income is incidental income. In this regard, we would like to make reference to the decision of Hon’ble Supreme Court in the case of Maxopp Investment Ltd. vs. DCIT [2018 (3) TMI 805 - SUPREME COURT] . In view of this latest decision of Hon’ble Supreme Court, view taken by the ld.CIT(A) on the strength of ITAT order is not sustainable. However, considering the meager tax free income it is not justifiable to disallow the expenditure more than the tax free income. We can make reference to the decision in the case of Correctch Energy P.Ltd. [2014 (3) TMI 856 - GUJARAT HIGH COURT] and Cheminvest Ltd. Vs. CIT [2015 (9) TMI 238 - DELHI HIGH COURT] - we would like to observe that if we estimate adhoc disallowance for expenditure ought to be incurred for earning tax free income, such estimated expenses are to be worked out ₹ 10,000/-; ₹ 20,000/-; ₹ 30,000/- in the Asstt.Years 2011-12, 2012-13 and 2013-14 respectively, qua dividend income of ₹ 1,02,050/-, ₹ 2,53,000/- and ₹ 3,05,265/
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