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2017 (8) TMI 640 - AT - Income TaxAddition made u/s. 14A - Held that:- We noticed that the assessee has held investments in three schemes of mutual funds and all of them have been liquidated during the year. Accordingly, we are of the view that there is merit in the contentions of the assessee that the provisions of Rule 8D(2)(iii) of the I.T. Rules should not be applied in the facts and circumstances of the case. Since the assessee has received dividend income and since there were activities relating to liquidation of mutual funds, we are of the view that some amount should be disallowed u/s 14A of the Act. Accordingly, in order to put this issue at rest, we modify the order passed by Ld CIT(A) on this issue and direct the Assessing Officer to make a disallowance of ₹ 5000/- out of administrative expenses to meet the requirements of 14A of the Act and in our view the same would meet the ends of justice. Addition relating to foreign exchange gains - income disclosed on non-qualifying ship - Held that:- In the instant case, assessee has accounted for the foreign exchange differences arising on ECB loan as per the Accounting Principles and hence the same is required to be ignored for the purpose of computing total income as per the provisions of section 43A of the Act as held in the case of Vodafone East Ltd (2015 (9) TMI 1358 - ITAT KOLKATA). In respect of foreign exchange gain difference arising on other items, we noticed that the assessee has allocated the gain between the qualifying ships and non-qualifying ships. Income from qualifying ships is computed under tonnage tax scheme. Since the exchange difference on other items have arisen out of shipping business, it will form part of shipping income. Since the income from qualifying ships was computed under tonnage tax scheme, no separate addition is required to be made in respect of foreign exchange gain allocated to qualifying ships. In view of the foregoing discussions, we are of the view that there was no requirement to make any further addition on account of foreign exchange gains over and above that was offered by the assessee as relating to nonqualifying ship. - Decided in favour of assessee.
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