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2016 (7) TMI 685 - AT - Income TaxDisallowance under section 14A made in respect of expenditure incurred for earning exempt income - Held that:- From the record, we found that the Assessing Officer has correctly computed the disallowance as per rule 8D, in so far as the relevant assessment year under consideration is the assessment year 2008-09. Accordingly, we direct the Assessing Officer to reduce the disallowance by the amount of ₹ 14,03,562 being disallowance of expenses already offered by the assessee in the return of income. Rebate under section 88E - In the computation of income, the assessee has restricted its claim of rebate under section 88E in respect of the securities transaction tax to ₹ 1,95,40,847 as against the actual payment of the securities transaction tax of ₹ 4,38,91,830 - Held that:- However, the Assistant Commissioner of Income-tax has applied the average rate of Income-tax to only direct income from the taxable securities transaction of ₹ 5,12,87,746 instead of the taxable income on the taxable securities transaction under the head "Profits and gains of business or profession" which is ₹ 5,74,89,989. Further, while computing the average rate of tax, the Assistant Commissioner of Income-tax has divided the total income- tax by the gross total income whereas the assessee claims that for the purpose of section 88E, the average rate of tax should be computed by dividing the tax on income under head "Profits and gains of business or profession" by income under the head "Profits and gains of business or profession". We found that applying the same principle, the average rate of Income-tax should be applied to ₹ 5,74,89,989 while computing the maximum ceiling on the amount of rebate under section 88E in respect of the securities transaction tax. It is also a matter of record that a similar claim of the assessee was accepted by the Commissioner of Income-tax (Appeals) in the assessment year 2007-08, against which the Revenue is not in appeal before us. No merit in the action of the lower authorities for reducing the assessee's claim of deduction under section 88E as done by the Assessing Officer.
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