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2020 (3) TMI 447 - AT - Income TaxDisallowance u/s 14A r.w. Rule 8D(2)(iii) - assessee made suo-motu disallowance - HELD THAT:- Assessee demonstrated that own interest free funds of the assessee were sufficient to cover the investment made. The CIT(A) deleted the disallowance made u/r 8D(2)(ii) by following the decision of Hon’ble Jurisdictional High Court in the case of CIT vs. HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT] . The Revenue in ground No.1 of the appeal has impugned the findings of CIT(A) in deleting the disallowance made un Rule 8D(2)(ii) in respect of interest expenditure. No material has been placed on record by the Revenue to controvert the findings of CIT(A) . We do not find any infirmity in the findings of CIT(A) in deleting the disallowance made under Rule 8D(2)(ii). The ground No.1 raised by the Revenue is devoid of any merit. The Special Bench of the Tribunal in the case of M/s. Vireet Investment Pvt. Ltd. [2017 (6) TMI 1124 - ITAT DELHI] has held that while computing disallowance under section 14A r.w. Rule 8D(2)(iii) only those investments that yield exempt income should be considered for computing average value of investments The second contention of the assessee that disallowance under section 14A of the Act should be restricted to the extent of exempt income earned is supported by the judgmen of PCIT vs. State Bank of Patiala [2018 (11) TMI 1565 - SC ORDER] . Thus, in the light of aforesaid decisions we deem it fit and proper to restore this issue to the file of Assessing Officer for the limited purpose of recomputation of disallowance under Rule 8D(2)(iii) in line with the principles laid down in the case of PCIT vs. State Bank of Patiala and ACIT vs. Vireet Investment Pvt. Ltd. [2017 (6) TMI 1124 - ITAT DELHI] Disallowance of mark to market loss - provision for mark to market loss is an unascertained liability, it is a provision for loss, which may or may not occur at the time of settlement of the contract at future date and hence, disallowed the same in entirety - HELD THAT:- Co-ordinate Bench of the Tribunal in assessee’s own case for assessment year 2011- 12 [2017 (5) TMI 1719 - ITAT MUMBAI] has considered this issue and has held that mark to market loss claimed by the assessee is allowable. We find no infirmity in the impugned order in accepting assessee’s claim in line with the order of Tribunal . Respectfully following the decision of Tribunal in assessee’s own case, we dismiss Ground No.2 of the appeal by the Revenue. Disallowance of discount on buy back of debentures - Assessee has treated the receipts on buy back of debentures as capital in nature - AO held that the receipts are on revenue account and thus, made addition - CIT(A) reversed the findings of AO and upheld the assessee’s contention that receipts on redemption of debenture are capital in nature - HELD THAT:- We concur with the findings of CIT(A) that the amount received by the assessee on redumption of debentures is not a source of income to the assessee. The buyback of debentures at a lower a mount simply reduces the loan liability of assessee , which is capital in nature. It is not a trading liability and hence, any reduction in such liability cannot be on revenue account. Thus, in view of the facts of case and decision discussed above, we find no reason to interfere with the reasoned findings of CIT(A) on this issue.
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