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2016 (4) TMI 300 - AT - Income TaxLong Term Capital Gain - loss claimed by the assessee - Held that:- Assessee has sold shares to its group company and booked a loss of ₹ 56,76,211/- under the head "capital gains". The Assessing Officer found that the purpose of selling share at a price less than market value/ book value was to escape from the tax liability therefore, it was disallowed by AO. However, from the above facts, we understand that genuineness of the transaction of sale and purchase of share with assessee and buyer-company has not been doubted by AO. The ld. DR could not bring anything on record that the transaction was a colorable device to reduce the tax liability. There has to be cogent reasons for holding a transaction as colorable device to reduce the tax liability. In the instant case the transaction was with the group company and at the price less than the book value. In our view this observation of the AO does not make the transaction as colorable device to reduce the tax burden. Disallowance u/s 14A - Held that:- Special Bench of the Tribunal in the case of Cheminveste Ltd. v. CIT reported in [2009 (8) TMI 126 - ITAT DELHI-B ] had held that disallowance u/s 14A could be made even in a year in which no exempt income was earned or received by the assessee. But this decision has been overruled by Bangalore Tribunal, Hon'ble Gujarat High Court and Hon'ble Allahabad High Court as stated supra. Moreover, we also find that the Special Bench decision in Cheminvest Ltd. (supra) has been overruled by the recent decision of the Hon'ble Delhi High Court in Cheminvest Ltd. (supra) case itself and hence it is no longer good law. Hence, we hold in favour of the assessee the alternative argument of the Ld. AR that only investments yielding dividend income during the year should be considered for disallowance u/s. 14A of the Act. Respectfully following the aforesaid judicial precedents, we have no hesitation in directing the AO to delete the addition made u/s. 14A of the Act. Disallowance u/s. 14A made to book profit computed u/s.115JB - Held that:- We find lot of force in the argument of the Ld AR that computation of disallowance under Rule 8D of the IT Rules can be used only for computation of income under normal provisions of the Act and not for book profits u/s. 115JB of the Act. Unless an item is debited in the profit and loss account, the same cannot be the subject-matter of addition to book profits under clause (f) of explanation to Sec. 115JB of the Act. The disallowance made u/s 14A of the Act read with Rule 8D of the IT Rules is only artificial disallowance and obviously the same is not debited in the profit and loss account of the assessee and same cannot be imported into clause (f) of Explanation to Sec. 115JB of the Act. We have already held that no disallowance u/s. 14A of the Act would operate in the facts and circumstances of the case. Accordingly, we reverse the orders of authorities below and allow ground raised by assessee.
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