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2018 (7) TMI 751 - AT - Income TaxDisallowance u/s. 14A read with rule 8D - Held that:- We note that when assessee is possessed of mixed funds which includes its own funds in sufficient quantity, a presumption that its own funds were utilized for the advances is to be drawn as held by the Hon’ble Bombay High Court in Reliance Utility & Power Ltd. Vs. CIT [2009 (1) TMI 4 - BOMBAY HIGH COURT]. Relying on the aforesaid decision of the Hon’ble Bombay High Court, we find force in this ground raised by the assessee. Therefore, we direct the AO to verify the facts stated above and if it is found that assessee had own funds to make investment in tax free securities, then no disallowance u/s. 14A of the Act is warranted. So this ground of assessee is allowed for statistical purpose. Whether the Ld. CIT(A) is justified in directing the AO compute the disallowance under rule 8D(ii) and 8D(2)(iii) by adopting those investments which have yielded exempted dividend during the relevant year? - Held that:- This Tribunal has consistently followed the dictum of law laid down in REI Agro Ltd. Vs. DCIT [2013 (9) TMI 156 - ITAT KOLKATA] in which the Tribunal held that only investment which has given rise to the exempted income should be taken into consideration while computing disallowance u/s. 14A read with Rule 8D (iii) of the Rules. This order has been upheld by the Hon’ble Calcutta High Court [2013 (12) TMI 1517 - CALCUTTA HIGH COURT]. CIT(A) order is confirmed only in respect to his direction for application of Rule 8D (iii) and since the Ld. DR was unable to bring on record any change in law or facts, we do not find any infirmity in the order of the Ld. CIT(A). Treatment to the expenses of ERP upgradation -revenue expenditure or capital - Held that:- We note that the issue is squarely covered in favour of the assessee by the decision of ITAT in assessee’s own case for AYs. 2003-04, 2004-05 and 2008-09 and the Ld. CIT(A) has given relief to the assessee by following aforesaid decisions, cited supra. Since the Ld. CIT(A) has directed the AO to consider the software expenses as allowable revenue expenses by following the aforesaid decisions of ITAT, supra and the Ld. DR was unable to bring on record any change in law or facts, we do not find any infirmity in the order of the Ld. CIT(A). Proportionate disallowance of interest attributable to CWIP - Held that:- We note that the issue is squarely covered in favour of the assessee by the decision of ITAT in departmental case for AY 2008-09.
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