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2018 (6) TMI 1785 - ITAT HYDERABADTaxability of Capital gain - Profit on sale of vessels of the division tonnage - taxability as per provisions of section 50(1) & 50(2) or not? - Special provision for computation of capital gains in case of depreciable assets - HELD THAT:- As in one of the situation, the value of such transfer is more than the value of block of assets, the excess is chargeable to tax under the head ‘capital gains’. In the given case, the excess i.e. profit is reduced from the block of assets and Block continue to have assets value and both situations highlighted in section 50(1) & 50(2) are not attracted. Therefore, as per Income Tax Act, this transaction has not generated any capital gains. Income has to be determined strictly as per the provisions of I.T. Act and not as per Companies Act/Book profit. Only in specific situation book profit is considered for only determining the taxable income u/s 115JB. In no other situation, the book profit is considered to bring an income which is not as per the provisions of I.T. Act. Just because a separate income is disclosed by the assessee, it does not mean that it should be brought to tax over looking the actual provisions of income tax. Therefore, the profit on sale of vessels of the division tonnage is not taxable as the provisions of section 50(1) & 50(2) are not attracted. Therefore, the addition made by the AO is deleted. Deduction u/s 80IA - deduction denied with regard to Karaikal Port, for which the CIT(A) in AY 2010-11 rejected the claim of assessee due to non submission of certificate - HELD THAT:- Since the assessee has submitted a certificate from the port authority certifying that they have entered into an agreement with the assessee for O&M of the port in AY 2009-10 itself, we set aside the order of CIT(A) and direct the AO to allow deduction u/s 80IA to Karaikal port also. Disallowance u/ 14A r.w.r. 8D - HELD THAT:- It is clear that we have to include those investments which has generated income and exclude those investments, which have not generated income. AO had taken the total investment instead of those investments, which have generated income. Accordingly, we direct the AO to calculate the disallowance of interest with prescribed formula. The main reason is that as per section 14A, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income, which is exempt from tax. The relevance is the expenditure in relation to income. The quantification has to be undertaken in relation to the exempt income. The investment which has not generated exempt income should be excluded from the calculation of ratio to determine the disallowance. Similarly, for the administrative expenses, 0.5% of average investments from which the exempt income is received should be considered instead of average of the total investments - considering the above discussion, we direct AO to recalculate the disallowance as per rule 8D(iii) as per the above guidance. Accordingly, ground raised by assessee is allowed for statistical purposes.
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