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2020 (12) TMI 929 - AT - Income TaxDisallowance u/s.14A - assessee had earned dividend income and claimed the same as exempt in the return of income - HELD THAT:- Even if the expenses are to be disallowed as attributable to the said investment activity, it could be disallowed on a proportionate basis only for 9 days and not for the whole year. Hence, in this regard, the computation mechanism provided in Rule 8D(2)(iii) of the Rules would only result in absurdity if it is followed. We find that the ld. AR at the time of hearing had placed reliance on the decision in the case of Lee and Muirhead Pvt. Ltd. [2019 (4) TMI 1871 - BOMBAY HIGH COURT] and the same, in our considered opinion, would come to rescue of the assessee wherein it had been held that Rule 8D cannot be applied blindly when the assessee had hardly incurred any expenses in relation to dividend earned and substantial investments were made temporarily in order to park idle funds. At the same time, some disallowance of expenses need to be made u/s.14A even though the investment was held for 9 days. In these peculiar facts and circumstances, we direct the ld. AO to adopt the disallowance workings given by the assessee during the course of assessment proceedings computing disallowance u/s.14A of the Act at ₹ 99,600/-. The disallowance of ₹ 99,600 could be treated as expenses incurred for 9 days attributable to investment activity and that would meet the ends of justice in the peculiar facts and circumstances of the instant case. Disallowance u/s.14A while computing book profit u/s.115JB of the Act - HELD THAT:- We find that the Special Bench of Delhi Tribunal in the case of Vireet Investments [2017 (6) TMI 1124 - ITAT DELHI] had already held that the computation mechanism provided in Rule 8D(2) of the Rules cannot be applied for the purpose of disallowance of expenses under Clause ‘f’ of Explanation to Section 115JB (2) of the Act. However, certain expenses need to be disallowed as per Clause ‘f’ of Explanation to Section 115JB (2) of the Act. Hence, we hold that the disallowance computed by the assessee on rationale basis at ₹ 99,600/- be disallowed under Clause ‘f’ of Explanation to Section 115JB(2) of the Act. The ld. AO is directed accordingly. Depreciation of revised written Down Value (WDV) of the assets acquired by the assessee from its holding company - whether the transaction would be covered by the provisions of Section 47(iv) and the actual cost as per Explanation 6 to Section 43(1) r.w.Explanation 2 to Section 43(6) ? - HELD THAT:- As decided in own case for A.Y.2007-08 in the case of the transferor company, the income is to be treated as income of the year in which the transfer has taken place. This shows that the subsequent event has the effect of withdrawing the exemption granted under section 47 and the income goes back to the date of transfer. Thus, provisions of section 47 are withdrawn on occurrence of the events mentioned under section 47A and the transaction has to be treated as a transfer under section 47(v) or (vi) of the Act as the case may be and the transferor company is liable to pay the capital gains tax. In the present case due to seizure of the assessee-company being a subsidiary of the transferor company, the provisions of section 47(iv) have ceased to apply, and the transaction has to be considered as a transfer. Section 47A provides for withdrawal of exemption and the resultant treatment to be given to income in the hands of the transferor company. Thus issue decided in favour of assessee.
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